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Some speculated companies that could partner with ArcelorMittal (New York Stock Exchange: MT) and Stelco (OTCPK:STZHF) for bids for US Steel (New York Stock Exchange:X) seem reasonable, according to a Citi analyst.
It is speculated that ArcelorMittal (MT) could partner with the Japanese Japanese steel (N.S.) for an offer, according to a “stark alert” from Betaville on Wednesday, which cited people following the situation.
There is also speculation that Canada’s Stelco (OTCPK:STZHF) could receive backing from Nucor (NUE) for its possible bid for US Steel (X), according to the Betaville article.
Both combinations seem reasonable and increase the probability that Cleveland-Cliffs (New York Stock Exchange:CLF) will face competition in its bid for US Steel (X), Citi analyst Alexander Hacking wrote in a note Thursday.
“Nucor would likely be interested in these assets (mini-mills) at the right price,” Hacking wrote in the note.
Citi does not know how US Steel (X)’s board can weigh the potential merits of cash offers versus stock offers with the varying levels of antitrust risk in an acquisition. Citi maintains a Neutral rating on US Steel (X) and a Buy rating on Cliffs (CLF), seeing the potential strategic benefit with US Stell, although he is still comfortable with Cliffs’ standalone valuation.
The sale process for US Steel (X) is speculated to be well advanced and a winning bidder may be announced in the coming weeks, Betaville added in its report on Wednesday.
The latest news comes after it was reported late last month that Cliffs (CLF) signed a confidentiality agreement and a short standstill agreement in order to participate in the US Steel (X) sales process. The suspension agreement expires on December 1, according to CNBC.
In August, US Steel (X) said it had signed confidentiality agreements with “numerous” third parties. US Steel (X) began a formal review process after rejecting a $7.3 billion offer from Cliffs (CLF).
Investors will be able to get more details on US Steel’s (X) sales process when the steelmaker reports earnings and holds its earnings conference call on October 26-27. Cliffs (CLF) is expected to report third-quarter results on October 23-24.
