U.S. Steel entering into NDAs with potential buyers
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Pittsburgh-based U.S. Steel is making more moves toward a potential acquisition after rejecting a proposal from Cleveland Cliffs Inc. to buy out the steelmaker in a $2.3 billion deal.
In a letter to shareholders issued Tuesday, U.S. Steel said it is entering into customary confidentiality agreements with “numerous third parties” about a potential transaction.
On Aug. 13, U.S. Steel said it rejected the bid from Cleveland-Cliffs because Cleveland-Cliffs declined to engage in further talks until after U.S. Steel had agreed to economic terms proposed.
In his letter to Cleveland-Cliffs, U.S. Steel CEO David Burritt said there were antitrust concerns related to the buyout offer as well as concerns on what the acquisition would do to the value of the company.
But with the rejection, U.S. Steel said it would explore “strategic alternatives,” which could include a potential sale.
“Given the significant amount of interest in our company from multiple, credible bidders, the board, with the counsel of our outside advisors, strongly believes it is our duty to conduct a strategic alternatives review process to fairly and fully evaluate all options available for U.S. Steel,” the company said in its letter to shareholders.
U.S. Steel founded the city of Gary with its Gary Works operation that at one time employed some 30,000 people. The steelmaker also operates the Midwest Plant in Portage.
In the letter to shareholders, the steelmaker said it has begun sharing due diligence information under the non-disclosure agreements with the potential buyers.
“While we don’t know how long the process will take, the board of directors, management team and outside advisors are moving quickly to complete it, all while focused on driving maximum value,” the company said.
While it is not known what companies U.S. Steel has entered into confidentiality agreements with, one company that is confirmed to not be involved is Pennsylvania-based Esmark.
The company, led by a former U.S. Steel executive, previously made an all-cash offer to acquire U.S. Steel valued at $7.8 billion. However, the company announced last week that it is no longer pursuing the acquisition, citing the position of the United Steelworkers, which is supporting Cleveland-Cliffs’ efforts to buy the steelmaker.
“The U.S. Steel board must go through their process that they previously announced. We wish them the best during this process, and we will evaluate any opportunities in connection with that process, subject to support from the USW,” said Esmark CEO Jim Bouchard.
The union said on Aug. 17 that it believes Cleveland-Cliffs is the “only realistic buyer able to acquire the totality of U.S. Steel” and has agreed to honor all of the agreements between U.S. Steel and USW.
In an Aug. 22 letter to employees, U.S. Steel said that any potential buyer would need to recognize the union as the representative of the company’s employees and must assume the terms of all agreements between the company and the union.
In the letter to shareholders, U.S. Steel said, “Once the review of strategic alternatives is completed, the board will decide on a path forward for the company that it believes is in the best interest of U.S. Steel stockholders.”