Construction vehicles are parked at the site of the construction of a new pig iron caster at U.S. Steel Gary Works on May 26, 2022.
Kyle Telechan for the Post-Tribune
United States Steel Corp. rejected a $7.3 billion buyout proposal from rival Cleveland-Cliffs on Sunday, and is evaluating “strategic alternatives,” according to its president.
After receiving word of the rejection, Cleveland-Cliffs publicly announced the terms of the offer, which it first presented to U.S. Steel’s board on July 28. The Ohio-based company proposed acquiring 100% of U.S. Steel’s outstanding stock for $17.50 plus 1.023 shares of its own stock per share.
U.S. Steel President and CEO David Burritt communicated the rejection in a letter to Lourenco Goncalves, his counterpart at Cleveland-Cliffs. He wrote that Cleveland-Cliffs leadership refused to sign a nondisclosure agreement unless U.S. Steel agreed to the economic terms of their proposal in advance, an arrangement he termed “unreasonable.”
“As you well know, our Board — or any board — could not, consistent with its fiduciary duties, agree to a proposal of which 50% is represented by your stock without conducting a thorough and completely customary due diligence process, to evaluate the risks and potential upsides and downsides inherent in the transaction, including the stock component,” he wrote. “Nor could our Board agree to your ‘headline price’ without appropriate discussion — under NDA — regarding the contribution of U. S. Steel to the value of the combined businesses. Pushing our Board to do so is in essence a demand that it breach its fiduciary duties.”
Though U.S. Steel’s presence in Northwest Indiana has waned in recent decades, its facilities maintain an important place in the region’s economy. Founded in 1901, the Pittsburgh-based integrated steel producer was responsible for the founding of Gary in 1906. U.S. Steel remains the eighth largest employer in Lake County and the third largest in Porter County, according to data from the commercial directory service Data Axle.
James Lane, an emeritus professor of history at Indiana University-Northwest who has studied the history of the region’s steel industry, told the Post-Tribune that a sale of U.S. Steel would have a less significant impact on Gary today than in past decades, citing the dramatically reduced size of the company’s labor force in the city and the fact that many of its employees who work in Gary now live elsewhere.
In Cleveland-Cliffs’ statement, which made no mention of a nondisclosure agreement, Goncalves wrote that going public with the proposal’s terms was a bid to “expedite substantive engagement between our two companies.”
“Although we are now public, I do look forward to continuing to engage with U.S. Steel on a potential transaction, as I am convinced that the value potential and competitiveness to come out of a combination of our two iconic American companies is exceptional,” he wrote.
Cleveland-Cliffs has the backing of the United Steelworkers (USW), an important component to securing ownership of U.S. Steel. Under the terms of the union’s collective bargaining agreement with U.S. Steel, the USW has the right to counter any proposal to acquire a controlling interest in the company.
