By Jyoti Narayan and Akanksha Khushi

(Reuters) -United States Steel Corp on Sunday launched a formal review of its strategic options, after rebuffing a takeover offer from rival steelmaker Cleveland-Cliffs Inc.

The unsolicited cash-and-stock offer from Ohio-based Cliffs valued U.S. Steel at about $7.3 billion, representing a 43% premium to its closing price on Friday.

Cliffs went public with its offer after U.S. Steel rejected the bid as being “unreasonable” and instead announced a formal review process, saying the company received multiple bids for parts or all of its business.

“Cliffs feels compelled to make its offer publicly known for the direct benefit of all of U.S. Steel’s stockholders and also make it known that Cliffs stands ready to engage on this offer immediately,” Cliffs said in a statement.

Cliffs said it had offered to pay $17.50 in cash and 1.023 shares of its own stock for each U.S. Steel share, which implied a 42% premium to U.S. Steel’s closing share price on July 28 when Cliffs privately approached the company.

A merger between Cliffs, which currently has a market capitalization of about $7.5 billion, and U.S. Steel would create a global steelmaking giant and help it compete better in an industry that is largely dominated by China.

Cliffs’ approach came after U.S. Steel reported its fifth consecutive quarter of profit declines and fourth straight quarter of falling revenue.

While its second-quarter revenue beat analysts’ forecasts, U.S. Steel shares were still trading on a weak price-to-earnings ratio of 5.7, well below the sector median of 9.0, with its shares down roughly 9.3% year to date.

Cliffs has been one of the most acquisitive players in the industry, having bought AK Steel Holding Corp in 2020 and then acquiring the U.S. business of steelmaker ArcelorMittal the same year.

“Although we are now public, I do look forward to continuing to engage with U.S. Steel on a potential transaction, as I am convinced that the value potential and competitiveness to come out of a combination of our two iconic American companies is exceptional,” said Lourenco Goncalves, chief executive of Cliffs.

Cliffs said its offer to acquire U.S. Steel had received the support of the United Steelworkers union, which is North America’s largest steel industry union.

Cliffs said it had also lined up debt financing for the proposed deal from several banks. The company has tapped Moelis & Company LLC, Wells Fargo, J.P.Morgan and UBS as its financial advisors, with Davis Polk & Wardwell LLP serving as the company’s legal counsel.

In a separate statement later Sunday, U.S. Steel confirmed it received an offer from Cliffs and other interested parties.

“U.S. Steel was unable to properly evaluate the proposal because Cleveland-Cliffs refused to engage in the necessary and customary process to assess valuation and certainty unless U.S. Steel agreed to the economic terms of the proposal in advance,” U.S. Steel said.

U.S. Steel has hired Barclays Capital and Goldman Sachs Group as its financial advisors, with Milbank LLP and Wachtell, Lipton, Rosen & Katz acting as its legal advisors.

(Reporting by Akanksha Khushi and Jyoti Narayan in Bengaluru; Editing by Paul Simao, Anirban Sen, Chris Reese and Sonali Paul)

By Kevin Yao and Qiaoyi Li

BEIJING (Reuters) -China’s new bank loans tumbled in July and other key credit gauges also weakened, even after policymakers cut interest rates and promised to roll out more support for the faltering economy.

Chinese banks extended 345.9 billion yuan ($47.80 billion) of new yuan loans in July, tumbling 89% from June to the lowest since late 2009 and falling far short of analysts’ forecasts, data from the People’s Bank of China showed on Friday.

Analysts polled by Reuters had expected new loans last month to fall sharply from 3.05 trillion yuan in June to 800 billion yuan, after record lending in the first half as the central bank tried to shore up sputtering consumption and investment.

The reading was also much lower than 679 billion yuan in July 2022.

While lending in China typically tends to fall back in July for seasonal reasons, the weak credit readings come days after other grim data which showed the world’s second-largest economy slipped into deflation last month while exports and imports plummeted, adding pressure on Beijing to roll out more forceful stimulus measures.

“China’s bank loan growth fell to its lowest in seven months in July, while broad credit growth dropped to a record low,” Capital Economics said in a note to clients.

“We expect further policy rate cuts (as soon as next Tuesday) and a spike in government bond issuance in the coming months, but unless there is a wider improvement in business and household sentiment, this probably won’t lift credit growth much.”

Hobbled by weak demand at home and abroad, China’s economic momentum has faltered in recent months despite strong bank lending in the first half.

Household loans, mostly mortgages, contracted by 200.7 billion yuan in July, after rising 963.9 billion yuan in June, as a debt crisis in the property sector deepened, while corporate loans slid to 237.8 billion yuan last month from 2.28 trillion yuan in June, central bank data showed.

China’s top leaders pledged in late July to step up support for the economy amid the tortuous post-COVID recovery, followed by a raft of similar pledges from various government agencies. But details so far have been scant, disappointing investors.

Central bank officials have pledged to use policy tools such as reserve requirement ratio (RRR) cuts to ensure reasonably ample liquidity.

WEAK CREDIT DEMAND

The central bank cut its benchmark lending rates in June by a modest 10 basis points, the first such reduction in 10 months. A number of analysts predict further small cuts this year, but say that may do little to turnaround the economic malaise quickly as long as consumers and companies remain in no mood to borrow.

“The poor lending data reflects weak financing demand from the real economy.” said Luo Yunfeng, an economist at Huajin Securities. “It’s not good to force companies to borrow money when they don’t need it.”

Some economists have flagged the risk of a balance sheet recession, as Chinese households and private firms build up savings and reduce borrowing and spending after three years of strict COVID curbs.

More fiscal stimulus is also expected, with local governments — many of which are already heavily indebted — being told to speed up bond issuance to fund infrastructure projects.

Broad M2 money supply grew by 10.7% in July from a year earlier, according to central bank data, decelerating from 11.3% in June and the slowest pace since April 2022. Analysts had expected it to expand by 11%.

Outstanding yuan loans expanded by 11.1% in July from the year before, the lowest so far this year, compared with 11.3% growth the previous month. Analysts had expected 11.3% growth.

Annual growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, also cooled, to 8.9% in July from 9.0% in June.

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.

In July, TSF slumped to 528.2 billion yuan from 4.22 trillion yuan in June. Analysts polled by Reuters had predicted July TSF at 1.1 trillion yuan.

(Reporting by Qiaoyi Li and Kevin Yao; Editing by Kim Coghill)

By Echo Wang and Anirban Sen

NEW YORK (Reuters) -SoftBank Group Corp is in talks to acquire the 25% stake in Arm Ltd it does not directly own from Vision Fund 1 (VF1), a $100 billion investment fund it raised in 2017, according to people familiar with the matter, potentially delivering a win for investors who have waited years for strong returns.

The discussions come as SoftBank, which currently owns 75% of Arm, is preparing to list the chip designer on Nasdaq next month at a valuation of $60 billion to $70 billion.

If the negotiations lead to a deal, the Japanese tech investor would be delivering a major, immediate windfall to VF1 investors, including Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala. They nursed losses after many of SoftBank’s bets on startups such as workspace provider WeWork Inc and ride-sharing firm Didi Global soured.

The alternative — letting VF1 sell its Arm shares in the stock market over time following the initial public offering (IPO) — would typically take at least one to two years given the size of the stake. It would also be more risky for the fund’s investors since it is possible that Arm’s shares could drop following the IPO.

VF1 returned to profitability in the latest quarter thanks to investors’ excitement around artificial intelligence boosting the value of some of the startups in which it invested. Yet its previous losses prevented SoftBank from securing outside investors for Vision Fund 2 (VF2), whose $56 billion in capital came from the Japanese firm and its management, including Chief Executive Masayoshi Son.

A big windfall for VF1 investors could boost SoftBank’s chances of tapping them for capital again in the future, though SoftBank currently has no plans to do so, according to the sources.

Son, who has hired investment bank Raine Group to advise SoftBank on the negotiations, has recused himself from VF1’s deliberations on the matter so that the fund makes a decision independently in the interest of its investors, the sources said.

VF1’s investment committee and SoftBank’s investment advisory board, attended by fund investor representatives, are handling the negotiations, one of the sources added.

The exact valuation for Arm that the two sides are discussing for their transaction could not be learned, and the sources cautioned that it is possible that no agreement will be reached.

If a deal is inked, SoftBank would be selling fewer Arm shares in the IPO and would be likely retaining a stake of between 85% and 90%, according to the sources, who requested anonymity because the negotiations are confidential.

SoftBank, VF1 and Arm declined to comment. Raine did not immediately respond to requests for comment.

CORNERSTONE INVESTORS

Arm’s IPO would be a boon not just for VF1 but also for SoftBank, which reported its third consecutive quarterly loss last week. It was hit by declines in the valuations of major holdings such as Chinese e-commerce firm Alibaba Group, German telecommunications company Deutsche Telekom and U.S. wireless carrier T-Mobile U.S..

SoftBank, which took Arm private for $32 billion in 2016, sold a 25% stake in the company to VF1 for $8 billion in 2017. SoftBank has also been in talks with several technology companies about bringing them onboard as cornerstone investors in Arm ahead of its IPO, including Amazon.com Inc, Reuters has reported.

SoftBank last week said VF1 delivered a gain of $12.4 billion on $89.6 billion of investments, while VF2 carried a $18.6 billion loss on $51.8 billion of investments.

The investment giant has been in “defense mode” since May 2022 after technology valuations crashed amid a rise in interest rates and economic uncertainty. But in June, Son said he was planning to shift to “offence” mode amid excitement over advances in artificial intelligence.

SoftBank began preparations for an IPO of Arm after a deal to sell the company to Nvidia Corp for $40 billion collapsed last year over objections from U.S. and European antitrust regulators.

Arm has been considering an offering up to $10 billion for its listing. Its plans to go public come as the U.S. IPO market shows signs of a recovery after an arid spell that lasted a year and a half, as major companies including grocery delivery service Instacart and marketing automation firm Klaviyo Inc get ready to list in New York.

Earlier this year, Arm rebuffed a campaign from the British government to list its shares in London and said it would pursue a flotation on a U.S. exchange.

Arm’s business has fared better than the broader chip industry because it licenses designs rather than paying to make processing systems itself. Its technology has become ubiquitous in smart phones and data centers, delivering lucrative royalty payments. Yet demand for smart phones has weakened lately, weighing on Arm’s earnings.

In a show of Arm’s significance for its investment portfolio, SoftBank in April asked Arm Chief Executive Rene Haas to join its board of directors.

(Reporting by Echo Wang and Anirban Sen in New York; Editing by Greg Roumeliotis, Mark Porter and Diane Craft)