Cliffs claimed that the USW's labor agreement gives the union "de facto veto power" over any deal, which would allow Cliffs to trump any competing bid for US Steel if it decides to sell. However, US Steel disagreed with this characterization, stating that the labor agreement only provides successorship rights and the right to bid, not the right to veto any transaction.
Under the terms of its labor agreement with US Steel, the USW has the right to make a counter bid after receiving notice of an offer and the ability to assign or transfer its rights to another entity, including a competitor like Cliffs. However, according to the labor agreement, US Steel is prohibited from entering into a sales agreement with any entity other than USW unless the transaction is superior to the USW offer.
The assignment of the USW's right gives Cliffs a strategic advantage for any potential takeover after its unsolicited bid on 13 August to buy the company for $17.50/share and 1.023 shares of Cliffs stock, a $35/share valuation, was rejected. Cliffs said it is the only realistic buyer able to acquire the totality of US Steel.
This has led to a frenzy across the industry, with other companies like Esmark also coming forward with unsolicited bids. A combined Cliffs and US Steel company would have steel production of 34.2 million short tons per year and rank as the 10th largest steel producer in the world.
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