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Some speculated companies that may partner with ArcelorMittal (NYSE:MT) and Stelco (OTCPK:STZHF) for bids for US Steel (NYSE:X) appear to be reasonable, according to a Citi analyst.
There’s speculation that ArcelorMittal (MT) may be teaming up with Japan’s Nippon Steel (NS) for a bid, according to a Betaville “uncooked alert” on Wednesday, which cited people following the sitation.
There’s also some speculation that Canada’s Stelco (OTCPK:STZHF) may receive backing from Nucor (NUE) for its potential bid for US Steel (X), according to the Betaville item.
Both of these combinations seem reasonable and raise the likelihood that Cleveland-Cliffs (NYSE:CLF) will face competition in its bid for US Steel (X), Citi analyst Alexander Hacking wrote in a note on Thursday.
“Nucor would likely be interested in these [mini mill] assets at the right price,” Hacking wrote in the note.
Citi doesn’t know how US Steel’s (X) board may weigh the potential merits of cash vs. stock offers with the varying levels of antitrust risk in a takeover. Citi remains neutral-rated on US Steel (X) and buy-rated on Cliffs (CLF), seeing the potential strategic upside with US Stell, though still comfortable with Cliffs stand-alone valuation.
The US Steel (X) sales process is speculated to be pretty advanced, and a winning bidder may be announced in the coming weeks, Betaville added in its report on Wednesday.
The latest news comes after reports late last month that Cliffs (CLF) signed a non-disclosure agreement and a short standstill agreement so it can participate in the US Steel (X) sales process. The standstill agreement expires on Dec. 1, according to CNBC.
In August, US Steel (X) said it entered into confidentiality agreements with “numerous” third parties. U.S. Steel (X) started a formal review process after rejecting a $7.3 billion Cliffs (CLF) bid.
Investors may get more details on the US Steel (X) sales process when the steelmaker is scheduled to report results and hold its earnings call on Oct. 26–27. Cliffs (CLF) is expected to report Q3 results on Oct. 23–24.
