Cleveland-Cliffs CEO mulls much lower bid for US Steel if Nippon deal falls apart

By Thomson Reuters Mar 15, 2024 | 8:38 AM

(This March 14 story has been refiled to fix a spelling error in the CEO’s last name throughout the story)

By Anirban Sen

NEW YORK (Reuters) – Cleveland-Cliffs CEO Lourenco Goncalves said on Thursday he would consider another bid for United States Steel likely worth no more than $30 per share if the latter’s $14.1 billion deal with Japan’s Nippon Steel falls apart.

In an interview with Reuters, Goncalves said Cleveland-Cliffs, which last year was among the bidders for U.S. Steel, continued to have the backing of steel union United Steelworkers (USW) and that U.S. Steel’s deal with Nippon Steel should be blocked because “Japan is not a friend” of the United States.

“Japan in the steel trade is worse than China,” said Goncalves. “Japan continues to be a serial dumper of steel in the United States. I’m going to work to ensure the continuation of the same tariffs on Japanese steel trade because if we remove the tariffs, they will just hurt us.”

Goncalves’ remarks came after U.S. President Joe Biden on Thursday raised concerns over Nippon Steel’s takeover of the iconic 122-year-old U.S. steelmaker.

Biden said it was important for the U.S. to maintain “strong American steel companies powered by American steel workers” and that it was vital for U.S. Steel “to remain an American steel company that is domestically owned and operated.”

Since Biden’s remarks, U.S. Steel’s shares have fallen more than 15%. The stock closed down more than 6% at $38.26 on Thursday, far below the $55 per share price it agreed with Nippon Steel.

The issue has the potential to overshadow an April 10 summit between Biden and Japanese Prime Minister Fumio Kishida aimed at boosting the long-standing security alliance between their countries in the face of growing Chinese strength.

Nippon Steel has, so far, said it is confident of successfully completing the acquisition of U.S. Steel, despite the opposition it has faced from the USW and certain U.S. senators. In January, Nippon Steel President Eiji Hashimoto told reporters that “the deal poses no harm to America.”

If the all-cash deal with Nippon Steel were to fall apart, Cleveland-Cliffs may choose to bid for U.S. Steel again but may not offer more than $30 per share, Goncalves said. That would be at least a 45% discount to Nippon Steel’s offer and substantially lower than Cleveland-Cliffs’ earlier cash-and-stock bid that it valued at $54 a share in December.

“I would say that 30 bucks is a very good offer. Three zero. Not 35, not 34, not 33, not 31 but 30 rounded in an all-cash bid – that would be good enough for U.S. Steel,” said Goncalves. At $30 per share, U.S. Steel would be valued at $6.7 billion.

Since the Nippon Steel transaction was announced in December, several Democratic and Republican U.S. senators have criticized the deal, citing national security concerns or raising questions about why the two companies did not consult U.S. Steel’s main union ahead of the announcement.

Donald Trump, Biden’s rival in the November U.S presidential election, has said he would block the acquisition of U.S. Steel if elected.

“They sold to the wrong bidder. They knew my opinion and the opinion of the USW, and of course they can ignore my opinion, but you cannot ignore the opinion of the USW. It was a fatal mistake,” said Goncalves.

U.S. Steel and Nippon Steel did not immediately respond to Reuters’ requests for comments.

(Additional reporting by Pratyush Thakur in Bengaluru; Editing by Krishna Chandra Eluri, Shounak Dasgupta and Jamie Freed)