There’s a Thaw in the U.S. Steel and Cleveland-Cliffs Relationship: Report

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Iconic American steel maker

United States Steel

is in play and

Cleveland-Cliffs

has emerged as the most credible buyer for the entire company. But Cliffs bid for

U.S. Steel

is hostile, something that can always complicate matters. There appeared, however, to be a thaw in their relationship which could speed a resolution to the sale process.

CNBC reported Thursday that

Cleveland-Cliffs

(ticker: CLF) has signed a so-called standstill agreement with U.S. Steel (X). It’s essentially an agreement between the two that allows U.S. Steel a little more control over the process while providing more access for Cliffs to U.S. Steel’s operations and financials.

U.S. Steel and Cliffs both declined to comment for Barron’s on the report.

It’s a positive development for the overall sale process. U.S. Steel announced it was looking at strategic alternatives, which could include a sale of assets or the entire company, on Aug. 13. The same day Cliffs announced its cash-and-stock bid.

That bid values U.S. Steel at about $33.257 today, about $1, or 3%, above where U.S. Steel stock is trading.

It’s a positive, but investors initially shrugged Thursday. Both stocks had dipped earlier but turned around with the rise in the stock market. U.S. Steel stock was up about 0.5% at $32.24. Cliffs shares rose 1.5% at $15.40. The

S&P 500
rose about 0.7% and the

Dow Jones Industrial Average
added 0.5%.

One interpretation of the muted stock price reaction is that the agreement is fine, but it doesn’t mean Cliffs will increase its bid materially. If U.S. Steel stock traded above the bid price it would signal investors expect a bump, or another credible bidder to emerge.

The odds of a higher bid are hard to handicap. Cliffs bid valued U.S. Steel at about $35 around the time of the deal announcement. U.S. Steel stock’s closing high of the past few years is about $38.50 reached in 2022.

Benchmark steel prices were about $1,500 a ton at the time of the high. Prices are about $800 a ton these days. Commodity prices always impact commodity-related stocks significantly.

Write to Al Root at allen.root@dowjones.com