31 August 2023
PITTSBURGH U.S. Steel is sharing due diligence information and has entered into confidentiality agreements with “numerous” potential buyers after receiving “multiple unsolicited proposals” for all or parts of the company, the iron ore mining and steelmaking company said in a letter to stockholders this week.
Because of those confidentiality agreements, Pittsburgh-based U.S. Steel, which owns the Minntac and Keetac mines and pellet processing plants in Mountain Iron and Keewatin, respectively, as well as a minority interest in Hibbing Taconite, would not disclose what companies had made offers.
“While the Board of Directors and management team are confident in the strategy currently underway, we take these proposals seriously,” U.S. Steel President and CEO David Burritt and Board Chair David Sutherland wrote in the letter. “Our number one obligation is to uphold our fiduciary duties. This means that we are focused on the path forward for our Company that drives the most value for you our stockholders.”
However, U.S. Steel has already rejected a $7.3 billion offer by Cleveland-Cliffs, which owns the remaining interest in Hibbing Taconite and three other Iron Range mines and pellet plants. Cliffs’ offer has the backing of the United Steelworkers union.
Reuters reported that Luxembourg-based ArcelorMittal was considering making an offer to buy U.S. Steel, too.
Last week, a third company, Esmark, withdrew its cash offer to buy U.S. Steel for $35 per share, or $7.8 billion, in light of the United Steelworkers backing the Cliffs offer.
U.S. Steel said it did not know how long the review process will take.
“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,” Burritt and Sutherland wrote in the letter. “While some companies undertake this kind of review privately, we chose to make it public to ensure that the process is as robust as possible and the Board hears all options, from any party that may have an interest in our Company.”
Cliffs had previously demanded U.S. Steel disclose any offers made by other companies, citing a move by the United Steelworkers to transfer their right to bid for the U.S. Steel to Cliffs. The union’s contract with U.S. Steel allows it to make an offer for the company if it is for sale, and the Steelworkers transferred that to Cliffs.
Cliffs and the Steelworkers maintain the contract requires union approval of any sale of U.S. Steel, but U.S. Steel maintains that it does not grant the union the power to veto a sale.
If Cliffs is successful in buying U.S. Steel, it would run every operating iron ore mine in the country.
In Minnesota, Cliffs owns and runs United Taconite in Eveleth and Forbes; Minorca Mine in Virginia; and Northshore Mining in Babbitt and Silver Bay. It also manages and owns the majority of Hibbing Taconite. Cliffs also has Tilden Mine on Michigan’s Upper Peninsula.
Like U.S. Steel, Cliffs ships its iron ore pellets to steelmaking facilities it owns along the eastern Great Lakes. Cliffs obtained the facilities after purchasing ArcelorMittal’s United States operations and AK Steel in 2020.
A combined Cliffs and U.S. Steel would be the 10th-largest steel producer in the world, according to a Cliffs presentation to investors.
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