Investors eagerly await the outcome of United States Steel’s strategic review. Although details are limited, it is clear that something significant is on the horizon.
In a recent letter published on the company’s website, U.S. Steel (ticker: X) informed investors that they have initiated customary confidentiality agreements with third parties. Additionally, they have commenced due diligence and are fully committed to maximizing shareholder value.
The impact of this update is already being felt in the market, with U.S. Steel’s shares rising by approximately 2% to $30.53 per share. In comparison, the S&P 500 and Dow Jones Industrial Average have both recorded modest gains of about 0.3% and 0.2% respectively.
This strategic review was prompted by U.S. Steel’s reception of bids for various parts of their business, as well as offers for the entire company. One notable bidder is Cleveland-Cliffs (CLF), a prominent player in the American steel industry. Their bid, comprising cash and stock, values U.S. Steel at nearly $35 per share. Based on current trading prices of Cliffs stock, this bid translates to approximately $32.70 per share.
While it remains uncertain if Cleveland-Cliffs is among the parties involved in signing the confidentiality agreement, both U.S. Steel and Cliffs have refrained from commenting on the matter thus far. Investors eagerly await further news regarding this crucial development.
Steel Industry Merger Frenzy
By Al Root
In the midst of a heated bidding war, steel service center Esmark, after initially announcing an all-cash bid, eventually decided to withdraw. As reported by Reuters, global steel titan ArcelorMittal (MT) expressed its interest in the acquisition but refrained from commenting further.
The bidding landscape remains obscure, with no clear indication of who the contenders are and what assets are being sought. Nevertheless, several major foreign steel producers are large enough to be potential participants. Companies such as POSCO (PKX), Gerdau (GGB4.Brazil), Ternium (TX), and ThyssenKrupp (TKA.Germany) could emerge as merger partners or bidders for specific assets. Currently, these entities have not been directly associated with the ongoing strategic review process.
However, it would be illogical for the prominent steel company Nucor (NUE) to enter the bidding fray. Nucor operates as a nonunion entity, while U.S. Steel employees are represented by the United Steelworkers. The resulting cultural clash would undoubtedly pose significant challenges.
In terms of production volume, U.S. Steel and Cliffs each manufactured approximately 16 million tons of steel in 2022. Nucor surpassed this figure with an output of around 26 million tons. On the other hand, Posco, Gerdau, Ternium, and Thyssen produced roughly 40 million, 14 million, 12 million, and 12 million tons respectively in the same period.
