Cleveland-Cliffs stock jumps despite losing US Steel bid
US Steel (X) accepts a $14.1 billion acquisition bid from Japanese steel producer Nippon Steel (5401.T), following an earlier rejection of Cleveland-Cliffs' (CLF) own bid. Nippon Steel's purchase of US Steel has created the world's second-largest steel company. This merger might be to Cleveland-Cliff's benefit, however, as the company's shares are soaring Monday afternoon.
Yahoo Finance's Julie Hyman and Josh Lipton weigh in on this merger and what it means for the steel industry.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Video Transcript
JULIE HYMAN: Nippon has agreed to buy United States Steel for $14.1 billion. It creates the world's second largest steel company and the biggest outside of China. Now there's a ripple effect here, because the move has sent stocks of rival Cleveland-Cliffs rising after US Steel rejected an offer from Cleveland-Cliffs, at least one offer earlier in the year.
The shares are up 9.5%, though, because the company now says what's it going to do with that money that it would have potentially used to buy US Steel, it's going to buy back shares. It doesn't say exactly how much here, but it says it's going to aggressively buy back shares here. And so the shares are trading higher.
The CEO Lorenzo Goncalves-- Lourenco Goncalves rather, saying the shares are significantly undervalued still. And so that's why they're doing this share buyback authorization. There was sort of a bidding war effectively for US Steel. And Cleveland-Cliffs, even though it was the loser, today is the winner in terms of stock.
JOSH LIPTON: Now you do kind of wonder what their next move is as well. If you're Cleveland-Cliffs, do they-- do they try again? Do they eye another target? If so, which one? I mean, most analysts continue to like this name, say it's a buy and it's had a nice year.
JULIE HYMAN: This-- the fact that they're doing this buyback seems to indicate they are not going to continue to bid for US Steel. What's interesting is US Steel and Cleveland-Cliffs are seen as the older guard, not having their less cost effective methods to produce steel, less technologically forward. You've got Steel Dynamics and Nucor, which are the more sort of tech forward, more efficient steelmakers. So does Cleveland-Cliffs then end up teaming up with one of the other existing independent US Steel makers? You know, I think we'll have to see what happens.
JOSH LIPTON: The drama continues.
JULIE HYMAN: Yes.
