💸 Steel drama

View in Browser

Tonight: A rapid and twisty saga in the world of steel. Plus: A Hawaiian utility's fire risk management comes under scrutiny. Let's get into it.

By Allison Morrow

Dow	35,307.63	0.07%
S&P 500	4,489.72	0.58%
NASDAQ	13,788.33	1.05%

Last updated August 14 at 7:44 PM ET

🏗 HOT STEEL

Things are heating up in the American steel industry.

Here's the deal: At least two companies have now made unsolicited bids to acquire US Steel, one of the nation's oldest steel companies, setting up a potential bidding war.

On Sunday, US Steel said it was reviewing its options after it received "multiple unsolicited proposals," including for the acquisition of certain assets to a purchase of the whole company outright.

By Monday morning, the board had rejected an offer from rival Cleveland-Cliffs, halting a deal that would have created the nation's largest steelmaker and dramatically reshape the industry.

Talks over that proposal broke down after Cleveland-Cliffs refused to sign a nondisclosure agreement that would allow the two companies to exchange financial information, my colleagues Chris Isidore and Samantha Delouya write. Despite the rejection, Cleveland-Cliffs said it still believes it can get the deal done.

It might have more competition than it bargained for.

Just hours after the Cleveland-Cliffs deal became public, another bidder swooped in.

Esmark, family-owned industrial conglomerate, is now offering to acquire US Steel in an all-cash deal.

James Bouchard, CEO of Esmark (and also a former US Steel executive, in case this saga wasn't twisty enough) said it is an "exciting time" for the American steel industry and "with Esmark's long-standing history of excellence, we are anxious to continue to grow and we're well positioned to come in and operate."

The US steel industry has been in a bit of a funk in recent years. Production shifted overseas and lower-cost Chinese steel undercut American manufacturers. But Trump-era tariffs on Chinese steel, along with Biden-era infrastructure investments, have revived demand for domestic steel.

Shares of US Steel surged double-digits in early trading Monday, and jumped even higher after news of Esmark's offer, rising nearly 40%.

The Esmark bid was a real surprise for Wall Street.

Although Esmark offered $35 a share, US Steel's stock was hovering below $32 — often an indication that investors are skeptical about a deal getting finalized.

"The Esmark bid is a shocker. I would expect that we would see some other steelmakers come into play before what is a traditional service center," Josh Spoores, an analyst at industry consultant CRU, told Bloomberg. "I don't know what to make of it. It's a head scratcher."

NUMBER OF THE DAY

$1.4 billion

UBS agreed to pay $1.4 billion to settle allegations the bank defrauded investors by selling mortgage-backed securities that blew up during the 2008 financial crisis.

The settlement resolves the final case brought by the Justice Department to investigate the role of Wall Street firms in the collapse of the US housing market. Other Wall Street firms including Barclays, Deutsche Bank and Goldman Sachs were previously hit by even larger fines to reach toxic mortgage settlements with the US government.

Prosecutors say they have slapped $36 billion in fines for conduct that fueled the 2008 financial crisis, including from banks and ratings firms. And that sounds like a lot until you consider that even a conservative estimate of the costs that the US government (read: taxpayers) incurred to rescue those institutions was about half a trillion dollars.

🚒 MAUI FIRES

Hawaiian Electric, the utility that provides power to 95% of Hawaii residents, is coming under scrutiny over how it handled fire risks ahead of the deadly wildfires that have ravaged Maui.

While the cause of the Maui fires hasn't been identified, a class-action lawsuit filed over the weekend blames the utility for failing to "deenergize" its power lines despite knowing the risks of sparking a fire.

Hawaiian Electric's vice president, Jim Kelly, told CNN on Sunday the company doesn't comment on pending litigation and that it was focused on supporting emergency response efforts and restoring power to affected areas.

Kelly said the utility does not have a formal shut-off program in place, and precautionary shut-offs have to be arranged with first responders. "Electricity powers the pumps that provide the water needed for firefighting," he said.

The utility's stock fell 40% Monday morning to a 13-year low.

Since the wildfires broke out on August 8, at least 96 people have been killed, making it the deadliest US fire in more than a century. Preliminary estimates of property damage put the residential losses alone at $1.3 billion, according to from research firm CoreLogic.

BIG PICTURE

It may be a while before an investigation determines the cause of the fire. But the early scrutiny on Hawaiian Electric isn't surprising.

Electrical systems are one of the most common causes of wildfires, according to the Western Fire Chiefs Association. Utility companies in California, for one, have developed safety protocols, including temporary power suspensions, to combat wildfires.

In 2018, electrical equipment from Pacific Gas and Electric (PG&E) sparked the Camp Fire, which killed 85 people. PG&E later paid out an $11 billion insurance settlement, as well as $1 billion paid to local governments.

WHAT ELSE IS GOING ON?

🗞 Dozens of news organizations condemned a police raid on Kansas newspaper and call for seized materials to be returned.

🚗 President Joe Biden sought to ramp up pressure on the United Auto Workers union and the nation's three unionized automakers – Ford, General Motors, and Stellantis – one month ahead of a critical deadline for labor talks.

🤖 Self-driving cars caused a traffic jam in San Francisco, just a few days after California regulators approved robotaxi companies to operate their driverless cars 24/7 throughout the city.

📉 The ruble hit a 17-month low against the dollar, highlighting the growing squeeze on Russia's economy from Western sanctions and a slump in export revenues.

📱POST OF THE DAY