US Steel explores strategic alternatives after receiving unsolicited bids

US Steel explores strategic alternatives after receiving unsolicited bids

(Bloomberg) — The United States Steel Corporation has begun a formal review of strategic alternatives after receiving “multiple unsolicited” proposals, a sign that the years-long transition may finally be bearing fruit.

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Chief Executive Officer David Porritt said Sunday in a statement that the proposals ranged from acquiring certain production assets to offers for the entire company. US Steel hired Barclays Capital and Goldman Sachs as financial advisors for the review.

The interest comes as US Steel, one of America’s best-known steelmakers, is going through a massive transformation of its manufacturing operations. It deploys furnaces to remelt the scrap into steel, rather than create metal from iron ore as it has done for over a century. Porritt took the helm of the then-struggling metals producer in 2017, when some investors feared it was heading for bankruptcy.

“The Board is taking a considered approach to considering these proposals, including seeking additional information in order to evaluate the initial proposals and subject to ongoing due diligence and review,” Porritt said in the statement.

The bet on the so-called small factories has become fruitful. In late 2020, the Pittsburgh-based company agreed to acquire the remaining stake in Big River Steel, an Arkansas-based electric arc furnace known for making high-quality steel that can be used in automobiles and other high-margin consumer products.

high premium

Some industry observers quietly derided US Steel at the time for paying an excessively high premium for the plant, but in the end it was seen as a necessary step for the company’s long-term viability. Shares have doubled since the end of 2019.

In 2000, US Steel was America’s largest steel maker, but earnings have been choppy over the past decade, with one of the worst stretches in its history as losses totaled $1.8 billion in 2013 and 2015. Now, though, After dropping to the No. 3 or No. 4 largest domestic producer, Burritt’s company has captured Big River’s momentum and veered into the electric-arc furnace business, anticipating injecting an additional $3 billion into the operation by 2024 to double capacity.

Steelmaker has not set a deadline for completing the review, and the process may not result in the company pursuing a transaction or other strategic outcome, according to the statement. Shares of US Steel are down 9.3% this year and closed at $22.72 a share on Friday, giving the company a market value of $5.07 billion.

US Steel’s roots go back to 1901 when J. Steel incorporated US steel production.

(Updates with context throughout.)

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