US Steel, Cleveland Cliffs spar over Nippon deal, misinformation allegations

US Steel's board of directors issued a public letter May 21 defending the merits of its proposed transaction with Japan's Nippon Steel against ongoing criticism from fellow US-based steelmaker Cleveland-Cliffs, which later released a direct response to US Steel, with both companies accusing the other of spreading misinformation.

"The investment by [Nippon] has been under attack since day one by one of our competitors and unsuccessful bidder -- Cleveland-Cliffs -- who has been sowing misinformation to our stakeholders in a relentless and unbridled effort to derail the transaction," US Steel said in a statement. "While Cleveland-Cliffs is pushing false rumors to influence the market into believing we are working to unwind the transaction, nothing could be further from the truth."

Following the publication of US Steel's letter, Cliffs released a response intended to address "the inaccurate allegations published by the US Steel board ... regarding its doomed attempt to sell its company to a foreign buyer without [United Steelworkers] support."

"At Cleveland-Cliffs, we only deal with transparency," CEO Lourenco Goncalves said in a statement. "It is unfortunate that the US 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."

US Steel received an unsolicited acquisition proposal from Cliffs in 2023, triggering a strategic review process where US Steel began soliciting other proposals. In December 2023, the Pittsburgh-based steel producer ultimately rejected Cliffs' bid and accepted a higher all-cash bid from Nippon valued at $14.1 billion and $55 per share, with a total enterprise value of $14.9 billion when accounting for Nippon's assumption of debt.

Nippon's proposed acquisition of US Steel, which is currently proceeding through customary regulatory approvals, has been met with opposition from union workers and many political leaders, most of which have cited disagreement at the prospect of a foreign company purchasing a US steelmaker. The transaction has already been approved by US Steel's board of directors and EU regulators.

Goncalves has repeatedly voiced his opposition to the Nippon-US Steel transaction, with his most recent public comments made during a press event at the American Iron and Steel Institute's annual general meeting earlier in May.

US Steel and Cliffs are the only two remaining companies that operate blast furnace steelmaking facilities in the US, which remain key suppliers to the automotive industry.

US Steel's defense

In its May 21 letter, US Steel said it sought to "correct the record" on what it called a "long-running misinformation campaign."

"Both Nippon and US Steel remain as fully committed as ever to completing the transaction that will protect and grow US Steel for generations to come, bolster competition and innovation in the American steel industry for the benefit of American consumers and enhance US national security," it said.

US Steel said it approved Nippon's bid after a lengthy review process that also fairly evaluated Cliffs' bid.

"The board found that the significant antitrust approval risk and associated valuation implications from a deal with Cleveland-Cliffs, among other risks, made their cash and stock proposal inferior to the higher, all-cash offer presented by Nippon," US Steel said. "Those antitrust and divestiture risks have subsequently been confirmed by multiple, independent sources."

The steelmaker said Nippon's potential investment in US Steel would promote domestic steel industry competition, national security, domestic jobs and the communities in which it operates.

Cliffs' rebuttal

Goncalves said Cliffs has not publicized any information that could be described as "misinformation."

"The key piece of 'misinformation' has been the US Steel board of directors insisting that the [United Steelworkers] had no veto power," he said. "That 'misinformation' remains on US Steel and Nippon Steel's deal website."

The USW endorsed Cliffs' bid to acquire US Steel and has expressed skepticism regarding the impact of a potential acquisition of US Steel by Nippon, with negotiations stalling among the parties.

US President Joe Biden said in April that he believed US Steel should remain "a totally American company," while potential presidential candidate Donald Trump said in February he would block Nippon's purchase of US Steel.

Goncalves referenced the stances of the USW, Biden and Trump in Cliffs' statement.

"With a USW-represented facility, you are not entitled to sell to whomever you please," he said. "The board of directors of US Steel failed its stockholders in this 'strategic review process,' and is attempting to blame Cliffs for its own self-inflicted disaster."