U.S. Steel began a formal review of strategic alternatives after it rejected a proposal to sell itself to rival Cleveland-Cliffs Co.

Ohio-based Cliffs said Sunday it was willing to pay $17.50 in cash and 1.023 shares of its stock for each U.S. Steel share. That implies a value of $32.53 per share as of Friday’s close, a 43% premium to U.S. Steel’s last closing price of $22.72, and a proposed market value of about $7.25 billion.

U.S. Steel rejected the “unreasonable” offer on Sunday, according to Cliffs’ statement. Hours earlier, Pittsburgh-based U.S. Steel said it had begun reviewing strategic alternatives after receiving “multiple unsolicited” proposals ranging from acquisitions of certain production assets to offers to buy the entire company. formal review.

Cliffs said the proposed deal would create one of the world’s largest steelmakers. The company has been the most active dealmaker in the U.S. steel industry for the past few years. Despite the rejection, the company is “ready” to accept the offer.

Cliffs, previously only an iron ore producer that does not produce steel, decided in 2019 to acquire AK Steel Holding Corp. and ArcelorMittal USA operate 2020. The acquisitions made Cliffs a major operator of conventional blast furnaces in the United States and a significant presence in the lucrative auto industry steelmaking business.

Cliffs CEO Lourenco Goncalves, known for his combative personality and rarely shying away from speaking out publicly, has a stable of nationally integrated conventional plants but has a footprint in electric arc furnaces Rarely, electric arc furnaces remelt scrap and turn it into steel.

The acquisition comes amid a years-long turnaround for U.S. Steel, which dates back to 1901, when J. Pierpont Morgan merged a collection of assets with Andrew Carnegie’s Carnegie Steel Company (Carnegie Steel Co.) merged. Chief Executive Officer David B. Burritt took over in 2017, when the then-troubled metals producer struggled when some investors feared the company was on its way to bankruptcy.

Since Burritt took over, the company has undergone a dramatic shift in its manufacturing process, focusing on furnaces that remelt scrap into steel, rather than making the metal from iron ore in the traditional way. Burritt acquired Big River Steel in Arkansas and expects to spend an additional $3 billion to double its capacity by 2024. The gamble has paid off, with the company’s share price doubling since the end of 2019.

U.S. Steel has hired Barclays Capital and Goldman Sachs as financial advisors for its strategic review. The steelmaker said in a statement that no deadline had been set for completing the review and that the process may not result in a deal or any other strategic outcome.

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