One of the bidders vying for
United States Steel
has dropped out of the race. Fewer viable bidders means a lower stock price for
U.S. Steel,
for now.
Wednesday, steel service center Esmark ended its $35 all-cash bid for iconic steel maker U.S. Steel (ticker: X). The decision was influenced by the United Steel Workers’ support for a bid from
Cleveland-Cliffs
(CLF).
“The USW was our partner in the successful acquisition of Wheeling Pittsburgh Steel, and we remain close with them,” said Esmark CEO Jim Bouchard in a news release. ” We wish [U.S. Steel] the best during this process, and we will evaluate any opportunities in connection with that process, subject to support from the USW.”
U.S. Steel announced on Aug. 13 that it was pursuing strategic alternatives after receiving bids for either the entire company or its assets. Cliffs was one of the bidders. It disclosed, also on Aug. 13, a cash and stock bid currently valued at about $33 a share. The original value of the bid, based on Cliffs’ stock price on July 28, was $35 a share.
Esmark offered $35 in cash on Aug. 14 and Reuters reported on Aug. 16 that
ArcelorMittal
(MT) was considering a bid. Mittal didn’t respond to a request for comment. The possibility of an
ArcelorMittal
bid prompted the USW to explicitly support a bid from Cliffs.
Cliffs appears to be in the driver’s seat, but KeyBanc analyst Philip Gibbs wrote recently that a Cliffs-U. S. Steel tie-up would face antitrust scrutiny. Both companies are big players in iron ore and automotive steel in North America.
U.S. Steel stock closed down 2.2% Wednesday, at $31.21, while the
S&P 500
and
Dow Jones Industrial Average
rose 1.1% and 0.5%, respectively. Cliffs stock rose 0.8%.
At current prices, U.S. Steel shares are about $1.70 or 5.4% below the value of the Cliffs bid. That spread might be tighter if investors expected more bidders or Cliffs increases its bid. Companies, such as Cliffs, don’t usually start by disclosing their best offer, but investors just aren’t sure how the U.S. Steel M&A drama will play out.
Write to Al Root at [email protected]
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