ArcelorMittal Considers Bid on US Steel, Reversing Retreat
In a surprising twist, ArcelorMittal SA, the world’s second-largest steelmaker, is said to be contemplating a bid for U.S. Steel Corp, marking a reversal of its previous retreat from the American market. Sources familiar with the matter revealed that ArcelorMittal is currently in talks with investment bankers to explore the possibility of making an offer, although nothing has been decided yet. This potential move would see the company shifting its focus back to the United States after selling most of its operations to Cleveland-Cliffs Inc for $1.4 billion in 2020, as it redirected its attention towards emerging markets like India and Brazil.
While ArcelorMittal is engaged in discussions with its investment bankers, there is no certainty as to whether it will proceed with the bid, according to insiders. However, if the company does decide to move forward, it could intensify the bidding war already underway for U.S. Steel, following competing offers from Cleveland-Cliffs and Esmark Inc, both exceeding $7 billion.
The sources, who wished to remain anonymous due to the confidential nature of the deliberations, revealed that representatives for ArcelorMittal and U.S. Steel have not yet responded to requests for comment.
It is worth noting that U.S. Steel workers belong to the United Steel Workers (USW) union, which has publicly supported the deal with Cleveland-Cliffs, even though U.S. Steel rejected that offer as unreasonable. The union’s endorsement is significant as its collective bargaining agreement with U.S. Steel grants it a party status in the negotiations and the right to present its own demands.
Responding to the news of ArcelorMittal’s deliberations, USW International President Tom Conway emphasized that ArcelorMittal would be unwise to proceed with a bid. Conway made it clear that the union would only endorse Cleveland-Cliffs and expressed dissatisfaction with the treatment of workers by ArcelorMittal in the past, without providing further details.
Following the reports of ArcelorMittal’s potential bid, U.S. Steel shares experienced a temporary surge of up to 6.3%, though they ended the trading day up 1.4% at $30.65, likely influenced by the union’s opposition. In comparison, the bids from Cleveland-Cliffs and Esmark were both valued at $35 per share upon submission. Esmark’s offer comprises cash only, while Cleveland-Cliffs plans to finance the deal with a combination of cash and its own stock.
ArcelorMittal’s current presence in the United States is limited to a joint venture with Nippon Steel Corp in Alabama. Together, they operate a plant that produces steel sheet products through the processing of semi-finished products acquired from local and foreign suppliers. Additionally, ArcelorMittal is investing around $1 billion in an electric arc furnace.
Analysts at Morgan Stanley raised concerns about ArcelorMittal’s bid deliberations, considering that they contradict the company’s strategy of reducing its carbon footprint and prioritizing growth in India and Brazil. They also expressed doubts about the potential cost synergies resulting from such a deal.
The decision by ArcelorMittal to reconsider bidding for U.S. Steel comes after U.S. Steel announced on Sunday that it had initiated a process to explore interest from potential acquirers. The company became an acquisition target due to several quarters of declining revenue and profitability, attributed to challenges posed by high raw material and energy costs.
ArcelorMittal, along with other steelmakers, has been grappling with a slowdown in global demand as economic growth decelerates. In its most recent quarterly report, the company disclosed a profit of $2.6 billion, which is half of the previous year’s figure.
As ArcelorMittal evaluates its options regarding a bid for U.S. Steel, the future of the market and the fate of the bidding war remain uncertain. Industry experts and investors eagerly await further developments to determine the potential impact of this unexpected turn of events.
