Cleveland Cliffs Inc (CLF)

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Barrons: U.SD. Steel Updates Sales Process

Al Root
Investors just don't know the fate of United States Steel . Something big is likely to happen, though.
Tuesday, U.S. Steel (ticker: X) updated investors about a strategic review it disclosed this month. In a letter posted on the steel company's website, management said they are entering customary confidentiality agreements with third parties, starting due diligence, and are focused on maximizing shareholder value.

That isn't a lot, but it's enough. Shares are up about 2% at $30.53 a share. The S&P 500 and Dow Jones Industrial Average are up about 0.3% and 0.2%, respectively.
U.S. Steel said on Aug. 13 that it was considering what to do next after receiving bids both for parts of the business and the whole company. Cleveland-Cliffs (CLF), one of the U.S.'s biggest steel company, disclosed the same day that it had submitted a cash and stock bid that valued U.S. Steel at close to $35 a share. The bid is worth about $32.70 a share based on where Cliffs stock is trading today.

It isn't certain if Cliffs is one of the parties signing a confidentiality agreement. U.S. Steel and Cliifs didn't immediately respond to requests for comment.
Following the Cliffs bid, steel service center Esmark announced, and then withdrew, an all-cash bid. ArcelorMittal (MT) was also interested, according to a Reuters report. ArcelorMittal didn't respond to a request for comment about the report.

It isn't clear who is bidding and on what. There are plenty of foreign steel producers that are large enough to take a look. POSCO (PKX), Gerdau (GGB4.Brazil), Ternium (TX), ThyssenKrupp (TKA.Germany) are all possible merger partners or bidders for certain assets, though none of those companies have been linked to the strategic review process.

It wouldn't make sense for the big steel company Nucor (NUE) to bid. Nucor is a nonunion operation and U.S. Steel workers are represented by the United Steelworkers . The culture clash would be significant.

U.S. Steel and Cliffs each produced roughly 16 million tons of steel in 2022, while Nucor pumped out about 26 million tons. Posco, Gerdau, Ternaium, and Thyssen produced roughly 40 million, 14 million, 12 million, and 12 million tons, respectively.

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08-29-23 1106ET
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