ArcelorMittal Considers Potential Bid for U.S. Steel Corp
Aug 16 (Reuters) – ArcelorMittal SA (MT.LU), the world’s second-largest steelmaker, is reportedly considering a potential offer to acquire U.S. Steel Corp (X.N), according to three sources familiar with the matter on Wednesday.
This move would mark a reversal of ArcelorMittal’s retreat from the United States as a production base. In 2020, the company sold most of its operations to Cleveland-Cliffs Inc (CLF.N) for $1.4 billion in order to focus on expanding its presence in growing markets such as India and Brazil.
Although discussions about a possible bid are currently taking place with investment bankers, there is no certainty about whether ArcelorMittal will ultimately move forward with the offer, according to the sources.
If ArcelorMittal does proceed with the bid, it could escalate an ongoing bidding war for U.S. Steel, as both Cleveland-Cliffs and Esmark Inc have already submitted rival offers worth over $7 billion.
The sources have requested anonymity due to the confidential nature of the deliberations. Representatives for both ArcelorMittal and U.S. Steel have not responded to requests for comment.
A crucial factor in this potential acquisition is the United Steel Workers (USW) union, of which U.S. Steel workers are members. The union has expressed support for a deal with Cleveland-Cliffs, even though U.S. Steel has rejected that offer as “unreasonable.”
Given that the USW’s collective bargaining agreement with U.S. Steel makes it a party in the negotiations, the union has the right to counter with its own demands, making their endorsement significant.
USW International President Tom Conway told Reuters that ArcelorMittal would be “foolish” to proceed with a bid, emphasizing that the union would only endorse buyers other than Cleveland-Cliffs. He also criticized ArcelorMittal’s treatment of workers in the past, without providing further details.
U.S. Steel shares initially rose by as much as 6.3% upon news of ArcelorMittal’s potential bid. However, the gains were pared due to the opposition from the union, ending trading up 1.4% at $30.65. In comparison, bids from Cleveland-Cliffs and Esmark were both valued at $35 per share upon submission. Esmark’s offer is an all-cash deal, while Cleveland-Cliffs plans to pay for the acquisition using a combination of cash and stock.
ArcelorMittal’s considerations come after U.S. Steel announced on Sunday that it had initiated a process to explore interest from potential acquirers. The company has become an acquisition target due to several quarters of declining revenue and profits, attributed to high raw material and energy costs.
Both ArcelorMittal and other steelmakers have been grappling with a slowdown in demand as global economic growth slows. Last month, ArcelorMittal reported a second-quarter profit of $2.6 billion, half of what was reported a year ago.
Currently, ArcelorMittal’s U.S. operations are limited to a joint venture with Nippon Steel Corp (5401.T) in Alabama. The companies jointly own a plant that produces steel sheet products by processing semi-finished products, or slabs, sourced from domestic and overseas suppliers. ArcelorMittal is also investing around $1 billion in an electric arc furnace.
Analysts from Morgan Stanley expressed their surprise at ArcelorMittal’s potential bid for U.S. Steel, as it appears to contradict the company’s strategy of reducing its carbon footprint and focusing on growth in India and Brazil. They also noted that there may be limited cost synergies resulting from such a deal.
The reports of ArcelorMittal’s potential bid for U.S. Steel come in the midst of an ongoing wave of consolidation within the global steel industry. With the deliberations still in progress, it remains to be seen how this potential acquisition will unfold and whether ArcelorMittal will enter the bidding war for U.S. Steel.
Reporting by Greg Roumeliotis in New York and Emma-Victoria Farr in Frankfurt; Additional reporting by Bianca Flowers in Chicago; Editing by Kirsten Donovan and Jamie Freed