U.S. Steel Evaluates Strategy Following Sustainability Improvements, Buyout Offers

Steel plant welding steel

(Credit: U.S. Steel)

by | Aug 15, 2023

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Steel plant welding steel

(Credit: U.S. Steel)

After making significant progress toward carbon emissions reduction, U.S. Steel has initiated a formal review process, evaluating strategic alternatives for the company, including potentially selling the company.

This follows an announcement from one of the company’s main rivals, Cleveland-Cliffs, that publicized their once-private offer to U.S. Steel. U.S. Steel rejected the first offer, which included a 43% premium to the company’s share price. Cleveland-Cliffs made their new offer of $35 per share, with 50% cash and 50% stock, public in order to expedite a response from the company.

Cleveland-Cliffs claims acquisition of the company would complement the companies’ shared interest in sustainability efforts.

“The numerous benefits we are excited about include the combination of our complementary U.S.-based footprint, our ability to leverage our in-house metallics capabilities, and enhancing our shared focus on emissions reduction,” said Lourenco Goncalves, CEO of Cleveland-Cliffs. “With these benefits, combined with our experience of extracting meaningful synergies from previous acquisitions, we expect to create a lower-cost, more innovative, and stronger domestic supplier for our customers across all segments.”

Since U.S. Steel’s public announcement, Esmark has also announced an all-cash public offer at $35 per share, representing a $7.8 billion offer, and U.S. Steel’s directors report multiple additional bids for the company.

U.S. Steel’s Net Zero Goals and Recent Profits

Among steel companies, U.S. Steel maintains one of the most aggressive sustainability targets, with a goal of reaching net zero by 2050 — the first North American-headquartered steel company to do so. The company also recently secured a $240 million green bond for financing a low-emissions rolled steel mill in Arkansas.

Comparatively, Cleveland-Cliffs has a goal of reducing carbon emissions by 25% by 2030, and Esmark currently lacks any kind of sustainability goals or reporting.

The U.S. Steel executive team reported $477 million in second-quarter profits, less than half of their profits from the same time period last year. Much of this drop is accounted for in the price decrease of flat-rolled and mini-mill products. Investment in mini-mills and electric vehicle motor production marks another key variable in the company’s strategy toward meeting net-zero emissions.

The recent decrease in U.S. Steel’s market value, with their shares dropping around 20% in the past six months, is attributed to their commitment to “decarbonization, deglobalization, and digitization,” according to President and CEO Dave Burritt.

“U.S. Steel has been on a strategic journey executing a compelling transformation,” said Burritt in the company’s report. “The interest demonstrated by the unsolicited proposals received to date is a validation of U. S. Steel’s strategy and successful track record of execution.”

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