By Steel service center Esmark has decided to withdraw its $35 all-cash bid for United States Steel (ticker: X), resulting in a decrease in the company’s stock price. This decision was influenced by the United Steel Workers’ support for a bid from Cleveland-Cliffs (CLF).
Esmark CEO Jim Bouchard expressed his gratitude towards the United Steel Workers, stating, “The USW was our partner in the successful acquisition of Wheeling Pittsburgh Steel, and we remain close with them.” Although Esmark has dropped out of the race, they will continue to evaluate opportunities related to the acquisition process, depending on the support from the USW.
After receiving bids for either the entire company or its assets, U.S. Steel announced on Aug. 13 that it was exploring strategic alternatives. Cliffs was one of the bidders and revealed a cash and stock bid valued at about $33 a share. Initially, based on Cliffs’ stock price on July 28, the bid was valued at $35 a share.
On Aug. 14, Esmark made a $35 all-cash bid, and there were reports on Aug. 16 that ArcelorMittal (MT) was considering a bid as well. However, ArcelorMittal did not respond to requests for comment. The United Steel Workers explicitly supported Cliffs’ bid after the possibility of an ArcelorMittal bid came to light.
Although Cliffs appears to have an advantage, KeyBanc analyst Philip Gibbs believes that a Cliffs-U.S. Steel merger would face antitrust scrutiny due to their significant presence in the iron ore and automotive steel sectors in North America.
On Wednesday, U.S. Steel stock closed down 2.2% at $31.21, while the S&P 500 and Dow Jones Industrial Average saw increases of 1.1% and 0.5% respectively. Cliffs’ stock, on the other hand, rose by 0.8%.
Currently, U.S. Steel shares are about $1.70 or 5.4% lower than the value of the Cliffs bid. The outcome of the U.S. Steel M&A drama remains uncertain, as investors are unsure of the potential for more bidders or if Cliffs will increase its bid.
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