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The tie-up between Cleveland Cliffs and US Steel should raise concerns about market concentration.
Jean-Christophe Verhagen/AFP via Getty Images
fight for
United States Steel
It has already taken a number of unexpected twists and turns. Investors got another one.
Thursday, mainly United Steelworkers Supported try before
Cleveland Cliffs
(Stock ticker: CLF) to acquire US Steel (X) by ceding its right to bid for the steel company to Cliffs. This is important because the agreement between the union and US Steel specifies that if the union places bids, the company is not allowed to accept other offers, unless the board of directors decides they are the best.
The second condition of the employment agreement is that any buyer must reach an agreement with the union before the deal can be closed. The result is that the union has “de facto veto power over a potential sale of the entire company,” a Cliffs spokesperson said in an emailed statement.
About 80% of US Steel’s employees in North America and Slovakia are covered by collective bargaining agreements.
US Steel isn’t sure. “We understand that USW has transferred (rights) to the Cleveland-Cliffs … While[the basic business agreement]grants USW[certain rights]it does not give USW or its assigns the right to reverse any transaction,” a company spokesperson said in a statement. Email Statement “Our commitment to and ability to conduct a thorough and comprehensive review of strategic alternatives to maximize value for our shareholders remains unchanged.”
US Steel itself unleashed the surprise takeover drama, announcing Sunday that it was seeking strategic alternatives after receiving “multiple offers” for the company or some of its assets.
Then on Sunday, the Cleveland Cliffs revealed a $35 cash and stock offer. Then, steel service center Esmark made a cash offer of $35 per share on Tuesday. Wednesday, Reuters reported that
Arcelor Mittal
(MT) was considering making an offer.
Arcelor Mittal
He did not respond to a request for comment.
Federation chairman Thomas Conway called ArcelorMittal’s potential offer foolish shortly after Reuters’ report. ArcelorMittal has already sold its US operations to Cliffs in 2020. The re-entry into the US industry will come as a surprise.
US Steel rose 0.8% in early trade on Friday. the
Standard & Poor’s 500
And
Dow Jones Industrial Average
They decreased by 0.3% and 0.1%, respectively.
US Steel rose about 26% for the week. However, the shares are trading below bids by a few dollars, suggesting that investors aren’t sure what’s going to happen.
There are grounds for deduction. The connection between Cliffs and US Steel may raise some concerns about market concentration because they’re both big players in iron ore and steel for cars. The union does not appear to favor ArcelorMittal. Gordon Haskett analyst Don Bilson noted that Esmark’s bid did not include any information on how the $7 billion to $8 billion purchase would be financed.
There is a lot for investors to think about. After a week of excitement, it looks like more drama lies ahead.
Write to Al Root at allen.root@dowjones.com
