US Steel says union cannot block company’s sale

Thursday’s announcement from US Steel clarifies that the labor agreement with United Steel Workers (USW) does not grant the union the authority to veto a company sale that might arise from the newly revealed strategic review.

U.S. Steel responded with a statement after USW’s announcement earlier this week. USW stated that they support only Cleveland-Cliffs (NYSE:CLF) Inc as a potential buyer for the company. The union mentioned that Cleveland-Cliffs has proven to be an excellent employer for its workers over time.

U.S. Steel didn’t accept Cliffs’ offer of $7.8 billion in cash and stock because they thought it was too low. Instead, they’re exploring different offers that they didn’t ask for. One of these is a $7.8 billion all-cash proposal from Esmark Inc, and ArcelorMittal (NYSE:MT) SA is also showing interest in buying the company.

In a regulatory filing, U.S. Steel said its agreement with the union gives the latter the right to counter with its own acquisition offer for assets covered under their bargaining agreement. If the union does not make an offer its board deems superior, U.S. Steel can sell itself to its chosen bidder.

USW representatives did not immediately respond to a request for comment.

The union has transferred its right to counterbid for U.S. Steel assets to Cliffs, which disclosed the arrangement on Thursday in a statement. It was not immediately clear whether this would impact the outcome of the bidding process, given that Cliffs was already participating in it.

In a presentation on its website, Cliffs had said that the union’s labor agreement with U.S. Steel constituted “a practical right to veto” a deal. It pointed to a requirement for the acquirer to reach a labor agreement with the union before a transaction is completed as a means for the union to stop a company sale.

Also on Thursday, Cliffs stated that it had agreed to maintain all the agreements between U.S. Steel and union workers if its bid is successful.