Long a mining company that shipped iron ore to steel mills, including those in Northwest Indiana, Cleveland-Cliffs consolidated much of America’s integrated steel industry in 2020 when it bought out AK Steel and ArcelorMittal USA.
Then like in the movie “Highlander,” it decided there can only be one.
The company put in a $7.3 billion offer to buy rival U.S. Steel for $33 a share, seeking to be the last integrated steelmaker left standing in the United States. That would have given it tremendous pricing power, particularly over the automotive industry that relies on the strong but still formable steel only integrated steel mills can currently produce.
U.S. Steel rejected the bid back in August, putting itself up for sale as it faced a potential protracted hostile takeover, arguing it could get a better offer. The gambit paid off.
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Nippon Steel more than doubled Cleveland-Cliffs’ original offer, agreeing to buy Pittsburgh-based U.S. Steel for $14.9 billion for all cash in a 40% premium over its stock price.
Steel industry consolidation has historically happened in waves, such as when Cleveland-Cliffs bought out its customers a few years ago and in the early 2000s when longtime steelmakers like Inland, Bethlehem and LTV vanished from the landscape.
Now an analyst is raising the question of whether a foreign steelmaker could seek to buy out Cleveland-Cliffs.
Jea Yu wrote an article for MarketBeat with the headline “Could Cleveland-Cliffs be the next steel company to be acquired?”
“This sent shares of all steel makers in the basic materials sector higher in sympathy, gapping up stocks like Cleveland-Cliffs Inc., Steel Dynamics Inc., Nucor Co. and Olympic Steel Inc. Steel stocks rose due to speculation of further industry consolidation and a price multiple expansion of the industry based on the impressive premium offered for U.S. Steel. This begs the question, who is next to be acquired?” he wrote. “The steel industry is no stranger to consolidation. In 2006, Indian-owned Mittal Steel acquired West European-owned Arcelor to form ArcelorMittal in a hostile takeover to become the world’s largest steel producer. In 2020, Cleveland-Cliffs acquired AK Steel Holding Co. for $1.1 billion in a stock swap to form the largest U.S. flat-rolled steel producer.”
Yu noted there appears to be a robust market of potential buyers.
“In August 2023, Cleveland-Cliffs made a $7.3 billion offer to acquire U.S. Steel, which was publicly rejected. It was rumored that U.S. Steel had multiple bidders leading up to the announcement, which included many peers, Nucor, Steel Dynamics, ArcelorMittal, POSCO, and Baosteel,” he said.
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