Is Cliffs/AK Merger a Winner? Some Observers are Skeptical

Early reviews of Cleveland-Cliffs’ decision to acquire AK Steel show mixed opinions among the market observers polled by Steel Market Update. On the surface, the marriage of the producer of value-added iron ore with the long-time steelmaker, its largest customer, seems a natural fit. But merging the two, very different companies may not prove so simple.

“The Cliffs deal to merge with AK Steel was one of the best kept secrets ever in our industry,” observed one SMU source. “From the standpoint of vertical integration, sometimes it works in your favor and sometimes it doesn’t. I’m not sure I see any real strategic gain in this deal with the exception of Cliffs getting a guaranteed customer for its products. In my opinion, this would be like buying a newspaper company. Yes, they have some value today, but in 20 years who is going to read a newspaper?”