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Cleveland-Cliffs Reminds U.S. Steel: You Have No Path to Close

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Cleveland-Cliffs (CLF) addressed allegations from U.S. Steel's Board on May 21, 2024, regarding its attempt to sell to foreign buyers without Union support. CEO Lourenco Goncalves emphasized the company's transparent practices and reiterated their stance on keeping U.S. Steel American-owned with Union backing. The U.S. Steel Board's claim that the Union lacked veto power is disputed by Cliffs, highlighting support from the United Steelworkers (USW) only for Cleveland-Cliffs. U.S. Steel's decision to pursue a deal with Nippon Steel, without Union endorsement, is criticized as presenting CFIUS risks and negative impacts on workers and national security. Prominent figures, including President Biden and candidate Donald Trump, have opposed the transaction to maintain U.S. Steel's American ownership.

Positive
  • Cleveland-Cliffs reinforces its commitment to transparency, which can build investor trust.
  • Union support for Cleveland-Cliffs' acquisition of U.S. Steel suggests strong labor relations.
  • The backing of prominent figures like President Biden enhances Cleveland-Cliffs' position.
  • Highlighting CFIUS risks may appeal to investors prioritizing national security.
Negative
  • The expired Final Offer may indicate potential missed opportunities for Cleveland-Cliffs.
  • The contentious dispute with U.S. Steel's Board may create public relations challenges.
  • The involvement of political figures could lead to increased regulatory scrutiny.
  • The failed acquisition attempt might raise concerns about future strategic initiatives.

The ongoing dispute between Cleveland-Cliffs and U.S. Steel hinges significantly on legal interpretations of union veto power and national security concerns. The reference to the United Steelworkers (USW) having a de-facto veto power is crucial. If the union's support is indeed a legal necessity for the sale to proceed, U.S. Steel's management might be on shaky ground. Furthermore, the mention of the Committee on Foreign Investment in the United States (CFIUS) suggests regulatory risks associated with the potential sale to Nippon Steel. CFIUS reviews transactions that may affect national security and the involvement of a foreign company like Nippon Steel could indeed pose a challenge. This adds a layer of complexity and risk for U.S. Steel stakeholders.

From a financial perspective, the abandoned acquisition attempts and the public conflict between Cleveland-Cliffs and U.S. Steel could have several implications. Firstly, the uncertainty and negative publicity may impact U.S. Steel's stock price adversely in the short term. Investors generally seek stability and may view this as a risk-laden situation. Secondly, the insistence on keeping U.S. Steel American-owned aligns with protectionist sentiments, potentially safeguarding American jobs and manufacturing capabilities. However, it also limits U.S. Steel's options for potential acquirers, possibly reducing competitive bids and, ultimately, shareholder value. Additionally, the mention of President Biden and Presidential candidate Donald Trump opposing foreign ownership highlights the political risks involved.

The broader market implications are also noteworthy. The ongoing conflict and the emphasis on national security and union support underscore the importance of these factors in the steel industry. This could set a precedent for future mergers and acquisitions within the sector, especially where unionized workforces are involved. The public statements from high-profile political figures reflect a broader trend of protectionism and could influence investor sentiment towards U.S. Steel and similar companies. Investors might prefer firms that have clear and stable paths to growth without such contentious issues.

CLEVELAND--(BUSINESS WIRE)-- Cleveland-Cliffs Inc. (NYSE: CLF) today addressed the inaccurate allegations published by the U.S. Steel Board on May 21, 2024, regarding its doomed attempt to sell its company to a foreign buyer without Union support.

Lourenco Goncalves, Cliffs Chairman, President and Chief Executive Officer, said:

“At Cleveland-Cliffs, we only deal with transparency. It is unfortunate that the U.S. Steel Board of Directors is just now realizing that it announced an un-closeable deal and is trying to blame Cliffs for its terrible decision-making.

There has been nothing we have publicized or said publicly that could be described as ‘misinformation.’ From our first offer to acquire U.S. Steel to our final (now expired) offer on December 15, we stressed the necessity of keeping U.S. Steel American-owned and having the full support of the Union. Our position has never changed.

The key piece of ‘misinformation’ has been the U.S. Steel Board of Directors insisting that the Union had no veto power. That ‘misinformation’ remains on U.S. Steel and Nippon Steel’s deal website.

Since we only deal with transparency, let’s state the facts:

  1. As we have explained to U.S. Steel since day 1, the United Steelworkers (USW) has declared they would only support Cleveland-Cliffs for a proposed acquisition of U.S. Steel. We see that as a de-facto veto power to disallow the acquisition of the entirety of U.S. Steel or USW-represented assets by anyone else other than Cleveland-Cliffs.
  2. On August 15, 2023, the late Tom Conway, former USW International President, said the union only endorses Cleveland-Cliffs to acquire U.S. Steel. This came after Conway said he received countless calls from potential bidders seeking the union’s approval – a necessary legal step for anyone seeking to buy U.S. Steel. David McCall, current USW International President, confirmed he only learned about Nippon Steel as an acquirer on the day that the deal was announced, December 18, 2023.
  3. The President of the United States, Joe Biden, has said that U.S. Steel should remain a ‘totally American company’ and ‘that is going to happen, I promise you…Guaranteed.’ Presidential candidate Donald Trump has said, regarding the transaction, ‘I would block it instantaneously. Absolutely.’
  4. In our Final Offer (now expired) to U.S. Steel on December 15, we noted specifically that Nippon Steel would present a CFIUS risk, along with the inherent risks of choosing a buyer without Union support. The Final Offer letter and the Powerpoint presentation attached to the Final Offer have now been uploaded to our clevelandcliffs.com website. We address CFIUS on page 2 of the letter and on page 14 of the presentation.
  5. David McCall, International President of the USW, has said ‘A merger between Nippon and USS would negatively impact workers, retirees, our communities, and our national security, and your Union is working in Washington, in the public, and under our BLA to stop it.’"

Mr. Goncalves concluded: “With a USW-represented facility, you are not entitled to sell to whomever you please. We knew this, and you apparently did not. We tried to explain to you, but you did not listen to us. The Board of Directors of U.S. Steel failed its stockholders in this ‘strategic review process,’ and is attempting to blame Cliffs for its own self-inflicted disaster. My opinion remains the same: You cannot and will not close your announced deal with Nippon Steel.”

About Cleveland-Cliffs Inc.

Cleveland-Cliffs is the largest flat-rolled steel producer in North America. Founded in 1847 as a mine operator, Cliffs also is the largest manufacturer of iron ore pellets in North America. The Company is vertically integrated from mined raw materials, direct reduced iron, and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling, and tubing. Cleveland-Cliffs is the largest supplier of steel to the automotive industry in North America and serves a diverse range of other markets due to its comprehensive offering of flat-rolled steel products. Headquartered in Cleveland, Ohio, Cleveland-Cliffs employs approximately 28,000 people across its operations in the United States and Canada.

MEDIA CONTACT:

Patricia Persico

Senior Director, Corporate Communications

(216) 694-5316

INVESTOR CONTACT:

James Kerr

Director, Investor Relations

(216) 694-7719

Source: Cleveland-Cliffs Inc.

FAQ

What did Cleveland-Cliffs say about U.S. Steel's foreign buyer deal?

Cleveland-Cliffs criticized U.S. Steel's attempt to sell to a foreign buyer without Union support, emphasizing the necessity of keeping U.S. Steel American-owned.

What was Cleveland-Cliffs' stance on Union support in the U.S. Steel acquisition?

Cleveland-Cliffs stressed that the United Steelworkers Union only supported their bid to acquire U.S. Steel, viewing this as a veto against other buyers.

Who opposed U.S. Steel's deal with Nippon Steel?

President Joe Biden and presidential candidate Donald Trump both opposed the deal, advocating for U.S. Steel to remain American-owned.

What risks did Cleveland-Cliffs highlight regarding U.S. Steel's foreign buyer deal?

Cleveland-Cliffs highlighted CFIUS risks and potential negative impacts on workers, retirees, communities, and national security.

Cleveland-Cliffs Inc.

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About CLF

arcelormittal usa is part of arcelormittal, the world’s leading steel and mining company. guided by a philosophy to produce safe, sustainable steel, we are a leading supplier of quality steel products in major north american markets including automotive, construction, pipe and tube, appliance, container and machinery. arcelormittal usa employs more than 20,000 people at 27 operations across 13 of the united states. we aim to give our employees every chance to flourish in their careers and grow as part of a global company. we offer a wealth of diverse opportunities. whether you work in production in pennsylvania or as a purchaser in indiana, joining arcelormittal is the start of a journey that, we hope, will lead to a rewarding career. we are always looking for the best and brightest minds to help us transform the future of steel.