Canadian steel company Stelco Holdings Inc. is bidding to acquire larger rival and former owner United States Steel Corp., adding to a growing list of suitors for the iconic U.S. company.
Stelco, whose sales and market value are eclipsed by U.S. Steel, is seeking to buy the Pittsburgh-based manufacturer to boost its steel assets and increase its market share in the supply of metal to the automotive industry.
Hamilton, Ont.-based Stelco is in talks with a potential partner for its bid, the people said, asking not to be identified because the details are private. A final decision has not yet been made and Stelco may refuse the offer. Representatives for Stelco and US Steel declined to comment.
US Steel shares rose 1.9% to $31.82 on Friday in New York, while Stelco shares rose 0.9% in Toronto.
U.S. Steel announced a strategic overhaul in August after rejecting a $7.25 billion offer from rival Cleveland-Cliffs Inc. The cash and stock offer is the latest bold move by Cliffs, which just four years ago transformed itself from a mere iron ore producer into a dominant steel company that acquired the former assets of ArcelorMittal USA and AK Steel Holding Corp. The battle for US Steel could mean the end of what was once the largest company in the world.
Stelco, once called the Steel Company of Canada, has a history of more than 110 years. By the mid-2000s, the company fell on hard times and filed for bankruptcy. US Steel bought the troubled manufacturer in 2007 and changed its name to US Steel Canada. Less than a decade later, US Steel took over some of Stelco's best contracts and abandoned what was left of the company in 2015. Chief Executive Officer Alan Kestenbaum, a renowned changemaker with decades of experience in the commodities industry, acquired the assets through bankruptcy. in 2017 and restored the Stelco name.
Cliffs is the only remaining company that has announced a purchase of US Steel, with its offer currently valued at $32.12. Esmark Inc. made the offer in mid-August and withdrew it nine days later, citing union support for the Cliffs restructuring deal. US Steel said several companies have expressed interest in the company. Last month, Reuters reported that ArcelorMittal, the world's second-largest steelmaker, was considering an offer from the American steelmaker.
Given the difference in share prices, Citi analyst Alexander Hacking wrote in a note to investors on Friday that it would likely require another steel company to take over some assets or provide "very significant" financial commitments to pay off existing US debt Steel, writes Hacking.
Stelco, which has a market value of about $1.5 billion, shipped 2.63 million tons of steel last year. By comparison, US Steel, which has a market value of about $7 billion, supplied 16 million tons.