A tie-up between Cleveland Cliffs and U.S. Steel would raise concerns about market concentration.
Jean-Christophe Verhaegen/AFP via Getty Images
The battle for
United States Steel
has already taken a number of unexpected twists and turns. Investors just got another one.
Thursday, The United Steelworkers essentially backed a bid by
(ticker: CLF) to acquire U.S. Steel (X) by assigning its right to bid for the steel company to Cliffs. That matters because an agreement between the Union and U.S. Steel specifies that if the Union bids, the company isn’t allowed to accept other offers unless the board determines they are superior.
A second condition of the labor agreement is that any buyer must reach a deal with the union before a deal can be closed. It appears a buyer can also agree with the union to assume the conditions of the existing labor contract. U.S. Steel didn’t immediately respond to a request for clarification.
The agreement and rights transfer give the union “de facto veto power on a potential sale of the whole company,” said a Cliffs spokesperson in an emailed statement.
About 80% of U.S. Steel employees in North America and Slovakia are covered by collective bargaining agreements.
U.S. Steel disagrees. “We are aware that the USW has transferred [rights] to Cleveland-Cliffs….while the [basic labor agreement] provides the USW with [certain rights], it does not provide the USW or its assignee the right to veto any transaction,” said a company spokesperson in an emailed statement. “Our commitment and ability to…