Stock rises on report of takeover bid

Other companies are expected to be interested in U.S. Steel as well.
PITTSBURGH (AP) -- U.S. Steel Corp. shares jumped more than 8 percent Friday after a Russian newspaper reported that OAO Severstal, with the help of other Russian iron ore companies, was considering a bid for the Pittsburgh-based steelmaker.
U.S. Steel shares rose 6.02, or 9.3 percent, to 70.59 in trading on the New York Stock Exchange.
John Armstrong, a U.S. Steel spokesman, told The Associated Press on Friday that the company wouldn't comment on "speculation and rumors."
"Our position on consolidation is that we believe in consolidation as long as there's value for our shareholders," he said.
Severstal spokeswoman Olga Antonova said, "We aren't commenting on rumors," when asked about the report.
Newspaper report
Russia's Kommersant newspaper reported Friday that Severstal, which tried and failed to take over Luxembourg-based Arcelor SA earlier this year, wants to create a 20 billion company in partnership with ore producers that would be positioned to bid on U.S. Steel. The newspaper quoted an unidentified person who it said was familiar with the plan.
Charles Bradford, an analyst with Soleil Securities of New York, said he wasn't surprised by Severstal's reported interest in U.S. Steel. He said he doubts the Russian company will be able to craft a takeover bid, but he does expect other international firms to make a run at U.S. Steel in the coming year.
"There is a lot of consolidation being done in the industry and there's more to come," Bradford said. "But I don't think Severstal is the only group interested in U.S. Steel. I think there are others."
Any takeover bid would be heavily scrutinized, Bradford said.
"Whether the U.S. government or someone else might not step in is another story. Because it is, after all, U.S. Steel," he said, referring to its iconcic value.
Background
The company, founded in 1901, grew from the dealings of legendary businessmen Andrew Carnegie, JP. Morgan and Elbert H. Gary. In its first year of operation, U.S. Steel manufactured 67 percent of the nation's steel and is still one the world's largest steel producers.
Under the direction of billionaire Chief Executive Alexei Mordashov, Severstal has already acquired bankrupt U.S.-based Rouge Steel Co. and Italy's Lucchini since 2004.
But Bradford said U.S. Steel might prove too big for even a 20 billion conglomerate headed by Mordashov's Severstal to gobble up. He noted any buyer would have to pay a 20 percent to 25 percent premium to U.S. Steel's 8 billion market value.
Still, consolidation will continue because larger companies have more flexibility in meeting fluctuations in demand for steel. Smaller steelmakers struggle to cut production because they have so few blast furnaces.
"So if you want to cut back production the only choice you have is to shut down one furnace, which cuts it back 50 percent," Bradford said. For companies such as U.S. Steel, however, "it's very easy to take one or two out to match supply with demand."