U.S. Steel shares jump after unsolicited bid from Cleveland-Cliffs

investing.com:

(Reuters) — Shares of U.S. Steel jumped 29% in premarket trading on Monday, after the more-than-a-century old steelmaker rejected a $7.3 bln buyout offer from Cleveland-Cliffs (NYSE:CLF) and said it would review its options following «multiple unsolicited proposals».

Cleveland-Cliffs, the largest flat-rolled steel producer in North America, said on Sunday it offered to buy U.S. Steel in a cash-and-stock deal valued at $35 per share, which represented a premium of 43% premium to U.S. Steel's last closing price.

Despite the surge, shares of U.S. Steel were trading well below the offer price at $27.92, indicating some investors believe a deal may not happen at that price. Cleveland-Cliffs shares were down 6.1%.

A combination between the two firms will create the largest steel producer in North America and the 10th largest steel producer in the world and will be a dominant supplier to the transportation sector, KeyBanc Capital Markets analyst Philip Gibbs said in a note.

«We view the probability of this deal getting done without meaningful concessions as low,» Gibbs added.

After surging for last two years due to a mismatch in demand and supply, steel prices have cooled so far in 2023, increasing margin pressure on companies grappling with high labor costs.

NYMEX U.S. Midwest Hot-rolled steel futures have fallen about 9% so far this year, but remain above pre-pandemic levels.

Cleveland-Cliffs has been betting on acquisitions to bolster growth and take on competition from China — it bought AK Steel and the U.S. business of ArcelorMittal (NYSE:MT) in 2020.

The company went public with its offer after U.S. Steel rejected the bid as being «unreasonable» and instead announced a formal review process and said it received multiple