Cleveland-Cliffs has expressed its interest in acquiring US Steel, intensifying the competition with Nippon Steel for ownership of the American steel giant. During a press conference held on October 13, 2023, at the company's headquarters in Pennsylvania, CEO Lourenco Goncalves articulated Cleveland-Cliffs' strategic motivations behind the potential acquisition.
“I want to acquire US Steel. We have plans,” said Goncalves, acknowledging the desire to expand Cleveland-Cliffs' footprint. Currently, Nippon Steel has proposed to acquire US Steel at a significantly higher offer than Cleveland-Cliffs’ preliminary proposal. Reports suggest Cleveland-Cliffs is exploring the option to partner with Nucor to acquire all shares of US Steel, potentially at around $30 per share, according to CNBC. This is, of course, well below Nippon Steel’s current offer which is around $55 per share.
While there is eagerness from Cleveland-Cliffs to move forward, Goncalves emphasized the complications they face due to Japanese firm Nippon Steel's commitment to US Steel. “Until US Steel abandons its merger with Nippon Steel, we cannot do anything,” he stated, which highlights the holding pattern Cleveland-Cliffs currently finds itself in.
This acquisition situation has drawn significant attention not only from competitors but also from investors. Following the announcement of Cleveland-Cliffs’ interest, US Steel's stock rose by 6%, reflecting investor confidence or excitement over the potential bidding war for the company. Nonetheless, experts caution this enthusiasm may be premature considering the challenges posed by the higher bid from Nippon Steel.
Legal entanglements are also on the horizon as both US Steel and Nippon Steel have taken steps to protect their merger agreement. On October 6, 2023, they filed legal action claiming Cleveland-Cliffs interfered unlawfully with the acquisition process. This lawsuit implicates Goncalves and other members of the USW, the United Steelworkers union, indicating the contentious nature of the competition for US Steel.
The backdrop to this situation includes significant geopolitical concerns, as President Biden’s administration has been wary of foreign ownership of key industries, particularly those involving national security. This could play additional factors as US Steel navigates its options.
Experts are speculating about the future of Cleveland-Cliffs' ambitions and the potential ramifications for the US steel market as competition heats up. If they are able to proceed with Nucor, Cleveland-Cliffs’ plan might establish them as formidable players alongside traditional rivals.
While the potential acquisition remains uncertain, the stakes are undeniably high. With American steel production being pivotal for both economic stability and national security, the outcome of this bidding war could reshape the industry.
Market analysts continue to watch developments closely, weighing both the financial performance of US Steel under current circumstances and the strategic maneuvers of Cleveland-Cliffs. How the situation plays out may well depend on the responses from US Steel’s management and any adjustments they could make to counter Cleveland-Cliffs' initiatives.
The acquisition saga of US Steel demonstrates the dramatic shifts and pressures within the steel industry, marked by powerful players and significant sums at stake. Whether Cleveland-Cliffs, with its ambition and willingness to confront legal hurdles, can emerge victorious remains to be seen.