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More than a year after its unsolicited bid kicked off a geopolitically fraught M&A battle, the US steel producer Cleveland-Cliffs remains interested in acquiring all or some of US Steel — but the bidding war it started has now driven the price beyond its reach, according to people familiar with the matter.
The smaller Cleveland-Cliffs made a roughly $10 billion unsolicited cash-and-stock offer in 2023, putting the iconic Pittsburgh company in play and ultimately producing a better pitch from Nippon Steel.
Last week, President Joe Biden blocked the $14 billion deal on national-security grounds. Nippon and US Steel then both sued the president, whose decision the companies say was influenced by politics, and Cleveland-Cliffs’ CEO Lourenco Goncalves, whom they accuse of colluding with steel union boss David McCall to undermine the sale.
US Steel shares have held steady, suggesting that investors think Goncalves will make another bid. But at roughly $33 a share in Monday trading, US Steel remains too pricey for Cleveland-Cliffs, which has a market value of around $4.9 billion, to make an offer with a standard deal premium, the people said. US Steel shares are up 45% since Cleveland-Cliffs made its offer in 2023, while Cliffs’ stock has slumped roughly 32%.
“I can’t force US Steel to sell to me, but I can work my magic to make a deal that I don’t agree with not to close,” Goncalves told investors last year on a call hosted by JPMorgan, according to Nippon’s lawsuit.
President-elect Donald Trump weighed in on Truth Social Monday, saying that a sale of US Steel didn’t make sense “when Tariffs will make it a much more profitable and valuable company.”
Cleveland-Cliffs has presented its bid as the patriotic choice, and that kind of rhetoric could endear it to Trump, but he hasn’t yet weighed in on a Cliffs’ bid — just his vehement opposition to Nippon’s.
Representatives for Cleveland-Cliffs, US Steel and Nippon Steel declined to comment.
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Rohan’s view
Cleveland-Cliffs’ paradoxical position is a sign of things to come as Washington takes a bigger role in the US economy. Goncalves’ domestic political skills — and in particular, his relationship with the United Steelworkers — are among his greatest strengths. McCall’s support went a long way in giving Cliffs’ July 2023 bid some credibility.
But while politicians prefer Cleveland-Cliffs’ American roots, the US company can’t actually compete on its own with the Japanese would-be-buyer’s deep pockets. Nippon has committed to investing billions into US Steel’s aging facilities. Its offer for US Steel represented a whopping 142% premium. Cliffs simply lacks the financial firepower for the whole of US Steel, the people close to the company said, even if it were to pursue a combined cash-and-stock deal like before that would stretch an already overstretched balance sheet.
The ideal situation for Cliffs would be cherry-picking parts of US Steel. It has a strong preference for the more labor-intensive, less-advanced blast furnaces but operates few of the more advanced electric arc furnaces.
US Steel has both kinds of furnaces — a strategy that mirrors Nippon Steel’s — but hasn’t shown any interest in selling off the two businesses separately, as of yet.
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Cleveland-Cliffs embarked on an acquisition spree beginning in 2020. Goncalves, along with his CFO and son Celso, transformed the iron ore miner into a real competitor to US Steel, rather than a mere supplier. It moved into steelmaking with its 2020 acquisition of ArcelorMittal’s US operations, and closed a $2.5 billion deal for Canada’s Stelco in November.