Steel distributor Esmark Inc. has changed its mind on buying United States Steel Corp., citing union support for a rival bid from Cleveland-Cliffs Inc. for the sudden turnabout.
(Bloomberg) — Steel distributor Esmark Inc. has changed its mind on buying United States Steel Corp., citing union support for a rival bid from Cleveland-Cliffs Inc. for the sudden turnabout.
The reversal is the latest twist in a frantic 11 days that has seen US Steel unexpectedly announce it was exploring strategic alternatives, its rejection of a $7.25 billion offer from Cliffs, and the United Steelworkers union coming out and exclusively supporting Cliffs’ bid. The battle over the iconic American steelmaker has fixated investors, producers, consumers and analysts that gathered in Atlanta this week for the industry’s biggest conference in North America.
Esmark said in an emailed statement Wednesday that it wouldn’t participate in the purchase process for US Steel, with the closely held company saying it “respects” the USW’s support of Cliffs. The statement comes nine days after Esmark made a surprise offer to buy US Steel for $7.8 billion in cash, trumping Cliffs’ earlier bid.
Shares of US Steel fell as much as 3.2% after Esmark’s statement. The stock settled 2.2% lower at $31.32 as of 4:15 p.m. in New York.
“The USW was our partner in the successful acquisition of Wheeling Pittsburgh Steel, and we remain close with them,” Jim Bouchard, Esmark chairman and CEO, said in the statement. “Esmark had previously stated its intention to bid for, and negotiate a purchase with, US Steel,” he said, adding that Esmark respects the USW position.
Read More: Labor Union Turns Up Heat in Battle Over Sale of US Steel
Esmark’s unexpected offer on Aug. 14 sent steel market participants scrambling to learn more about the service center and its CEO. The company’s announcement of an offer was light on details for investors and included a lengthy biographical section about Bouchard, 62, that included personal accolades stretching back to his high school days.
Shares of US Steel never touched the $35-a-share offer by Bouchard, and multiple analysts went public expressing skepticism of his bid. BNP Paribas even wrote in an Aug. 17 note to its clients that it didn’t believe Esmark’s offer was credible. “Inconsistencies in the press release, the absence of SEC filings and an unusual interview from the CEO are also leaving us dubious,” BNP said in its note.
The most recent developments between US Steel and Cliffs have centered on the Steelworkers’ right to bid for the Pittsburgh-based producer in the event that the company is presented with a “bona fide” takeover offer. US Steel said Tuesday in a filing that it sent a letter to its union workers regarding the strategic review process announced earlier this month, informing them of rights outlined in last year’s labor contract. Hours later, Cliffs submitted a filing indicating it sent US Steel a letter saying the company is obliged to inform the steelworkers and Cliffs of any proposals received.
“Let’s see what happens next,” Bouchard said in a text message to Bloomberg News.
(Adds context throughout. An earlier version corrected spelling of Steelworkers in first paragraph.)
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