(Bloomberg) — Steel processor and distributor Esmark Inc. offered to buy United States Steel Corp. for $7.8 billion in cash, presenting a rival bid to Cleveland-Cliffs Inc.’s unsolicited proposal for the US industrial icon.
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Privately held Esmark surprised industry insiders on Monday with the announcement that it is bidding for US Steel — the company hasn’t recently been active in mergers and acquisitions and its business is focused on processing and distributing steel, rather than raw steelmaking.
US Steel shares spiked further on the news and closed 37% higher, its biggest one-day gain on record. Still, the closing price of $31.08 a share remains below the $35 a share being offered by Esmark.
The Esmark announcement is the latest twist in a rapidly evolving saga that has the potential to reshape the American steel landscape. US Steel announced Sunday it had started a strategic review of alternatives after rejecting the offer from rival Cliffs, which was valued at $7.25 billion based on closing prices on Friday. In its statement, US Steel said it had received multiple approaches for part or all of its business and it has appointed advisers for the review.
“The Esmark bid is a shocker. I would expect that we would see some other steelmakers come into play before what is a traditional service center,” said Josh Spoores, the principal steel analyst at industry consultant CRU. “I don’t know what to make of it. It’s a head scratcher.”
Esmark chief executive officer and owner James Bouchard, a one-time US Steel executive, said in a phone interview that the company has available cash on hand to fund the offer. He also said he previously made an offer to US Steel nine months ago.
Esmark made headlines over a decade ago when it sold its steel assets to Russia’s OAO Severstal in 2008, before repurchasing three processing plants that were part of the earlier deal in 2010, as Severstal exited that business in the US. However, those deals were dramatically smaller than the bid it has announced for US Steel.
The company said on Monday it is a leading processor and distributor of value-added flat-rolled steel in the US and the third-largest domestic producer of tin plate steel.
US Steel is one of the icons of US industry, tracing its roots back to 1901 when J. Pierpont Morgan merged a collection of assets with Andrew Carnegie’s Carnegie Steel Co.
(Updates with details throughout.)
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