USS, Cliffs publicly clash on Nippon deal feasibility

After the US Steel (USS) board of directors issued a letter claiming Cleveland-Cliffs is spreading inaccuracies regarding the legitimacy of its sale to Japan’s Nippon Steel, Cleveland-Cliffs has fired back with a press release calling the proposed transaction “an un-closeable deal,” Kallanish reports.

“Unfortunately, we have found ourselves in the midst of a long-running misinformation campaign targeting our company, our investors, our employees and our business partners. For that reason, we must correct the record,” the US Steel board states in an update to investors, employees, stakeholders and interested parties on 21 May.

USS accuses its Ohio-based rival of “sowing misinformation to our stakeholders in a relentless and unbridled effort to derail the transaction. While Cleveland-Cliffs is pushing false rumours to influence the market into believing we are working to unwind the transaction, nothing could be further from the truth,” the letter adds.

USS claims that it vetted Cleveland-Cliffs as a legitimate prospective buyer before finally deciding, “in the end, the Nippon Steel Company’s transaction was superior and offered the most value. The board found that the significant antitrust approval risk and associated valuation implications from a deal with Cleveland-Cliffs, among other risks, made their cash and stock proposal inferior to the higher, all-cash offer presented by NSC.”

In response, Cliffs sent out a statement under the title “Cleveland-Cliffs Reminds US Steel: You Have No Path to Close.”

“It is unfortunate that the US Steel board of directors is just now realising that it announced an un-closeable deal and is trying to blame Cliffs for its terrible decision-making. There has been nothing we have publicised or said publicly that could be described as ‘misinformation’,” says the Cliffs statement.

Lourenco Goncalves, Cleveland-Cliffs’ chief executive officer, contends that US Steel’s labour agreements with the United Steelworkers, who favored Cliffs as a would-be acquirer, are too high of a hurdle for Nippon to clear.

“With a USW-represented facility, you are not entitled to sell to whomever you please. We knew this, and you apparently did not,” his statement says. “We tried to explain to you, but you did not listen to us. The board of directors of US Steel failed its stockholders in this ‘strategic review process’ and is attempting to blame Cliffs for its own self-inflicted disaster.”

In August 2023, US Steel rejected a takeover offer from Cleveland-Cliffs (see Kallanish 14 August). In late 2023, USS accepted a bid from Nippon Steel, setting the stage for the combined entity to become the second-largest steel producer in the world (see Kallanish 18 December).

Market participants have expressed fears that a USS acquisition by Cleveland-Cliffs could weaken competition in the market, potentially leading to higher flat-steel prices (see Kallanish passim). US President Joe Biden announced that he too believes “US Steel must remain domestically owned” (see Kallanish passim).

Kristen DiLandro USA