(Reuters) – Shares of US Steel jumped 29% in pre-market trading Monday, after the more than century-old steelmaker rejected a $7.3 billion takeover bid from Cleveland-Cliffs and said it would review its options after “several proposals.” Undesirable. “.
Cleveland-Cliffs, North America’s largest producer of flat steel, said Sunday it had offered to buy US Steel in a cash-and-stock deal at $35 a share, a 43% premium over another US Steel company. final price.
Despite the rally, shares of US Steel traded well below the offer price of $27.92, suggesting that some investors think the deal may not happen at that price. Cleveland-Cliffs shares fell 6.1%.
The combination of the two companies would create the largest steel producer in North America and the 10th largest steel producer in the world and would be a key supplier to the transportation sector, KeyBanc Capital Markets analyst Philip Gibbs said in a note.
“We see the likelihood of this transaction concluding without meaningful concessions as low,” Gibbs added.
After surging in the past two years due to a supply-demand mismatch, steel prices have eased so far in 2023, adding to margin pressure on companies grappling with rising labor costs.
Nymex western hot-rolled steel futures are down about 9% so far this year, but still above pre-pandemic levels.
Cleveland Cliffs is betting on acquisitions to boost growth and catch up on competition from China – it bought AK Steel and US company ArcelorMittal in 2020.
The company announced its bid after US Steel rejected the offer as “unreasonable” and instead announced a formal review process and said it had received multiple bids for parts or all of its work.
US Steel said it has invited the Cleveland Cliffs to be part of the review process.
(Reporting by Priamvada C in Bengaluru; Additional reporting by Reshma George and Urban Daniel Varghese in Bengaluru; Editing by Soumyadib Chakrabarti)