In the race to land steelmaker U.S. Steel (NYSE:X), just hours ago, it seemed like Cleveland-Cliffs (NYSE:CLF) was poised to be the only real bidder in the game. The assignment of an “exclusive right to bid” on the company seemed to do that much for it, particularly with the blessing of the United Steelworkers that came with it. But ArcelorMittal (NYSE:MT) may not be out of the hunt just yet. U.S. Steel, meanwhile, gained over 2% in Monday afternoon’s trading as the bidding war heated up.
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As the second largest steel company around, ArcelorMittal is worth paying attention to. And now, it’s engaged the services of Bank of America in a bid to help it structure a potential offer. The “potential offer” in question, reports note, could get as high as $38 per share, which would represent a substantial premium over what U.S. Steel stock is selling for as of this writing. That would largely beat Esmark’s offer, as Esmark was ready to offer $35 per share in cash. The exact amount of Cleveland-Cliffs’ deal isn’t known, but we do know it’s offering a combination of cash and stock.
While the bidding war is indeed starting to heat up, there’s one big unanswered question that’s lurking off in the wings: just how the Biden Administration will take this. The Federal Trade Commission has landed with both feet on the throat of deals smaller than this one. The odds of two major steelmakers merging without some kind of intervention from the FTC seems a bit unlikely. That’s strictly conjecture, of course, but this entire process may ultimately prove moot.
Either way, though, analysts aren’t recommending investors stick around for the aftermath. Currently, U.S. Steel stock is rated a Moderate Sell by consensus, with four Hold ratings and three Sell. Meanwhile, U.S. Steel stock also comes with a downside risk of 26.94% thanks to its average price target of $23.05.
