Steel Mills

Cliffs Execs Quiet on Potential U.S. Steel Deal

Written by Laura Miller

Cleveland-Cliffs executives were careful not to disclose much about talks with U.S. Steel on a potential acquisition of the iconic Pittsburgh-based steelmaker.

But there were hints of progress being made and an announcement coming in the not-too-distant future on Cliffs’ third-quarter earnings call with analysts on Tuesday, Oct. 24.

Cliffs’ Chairman, President, and CEO Lourenco Goncalves noted there were restrictions on what the company could disclose. That’s why listeners would not be hearing anything about the “potential exciting and transformational opportunity” that was announced in August, he said.

Recall that Cliffs has signed a non-disclosure agreement (NDA) with U.S. Steel.

An analyst asked for more information about Cliffs’ right to bid on U.S. Steel. That bid was transferred to it by the United Steelworkers (USW) union. Goncalves declined to comment.

Another analyst inquired about Cliffs’ capital allocation plan, its strategy on big M&A opportunities, and whether it was prioritizing more growth.

Because the company has reduced its debt by a large amount, it is in “a position now to have the flexibility to go in other directions,” Cliffs’ CFO Celso Goncalves noted. This could also include accelerating share buybacks, introducing a cash dividend for investors, and continuing to pay down debt.

Additionally, from an “M&A standpoint, the flat rolled market remains fragmented,” Celso said, noting that “there are many avenues the company could pursue towards further consolidation.” Alluding to its 2020 acquisition of ArcelorMittal USA and AK Steel, he said the company has successfully executed M&A in the past. “That’s what we’re going to continue to do going forward,” he stated.

“We feel good where we are right now … being aggressive and opportunistic with M&A opportunities,” Celso added.

Lourenco made a point to thank the Biden Administration for its focus on projects and investments that promote middle-class, union jobs.

He noted that “regulatory authorities have been strict on fighting M&A deals that harm workers, and rightfully so.” But the administration “is aligned with us on the long-term collaborative approach with unions.” And it has “taken notes that Cliffs puts workers at the center of our strategic decisions and growth objectives.”

Lourenco, a self-proclaimed optimist, was in good spirits on the call.

“We’re going to have lots of things to discuss in February. Stay tuned,” he said. “And keep paying attention because we move fast, even though not everybody does.”

He ended the call noting that Cliffs’ next earnings call wouldn’t be until February. He then wished analysts and investors a ‘Happy Thanksgiving’ and a ‘Merry Christmas.’

SMU has heard from various sources that an announcement regarding U.S. Steel’s deal could come as early as Nov. 1. But some have also stressed that the widely circulated rumor might be just that – a rumor.

Laura Miller

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