Nippon Steel acquires industrialization key player U.S. Steel in all-cash deal $14.1B

01/01/2024 / By Belle Carter

United States Steel Corporation, once the most valuable company in the world that played a key role in the nation’s industrialization, on Monday agreed to be purchased for $14.1 billion by Nippon Steel, Japan’s largest steelmaker. The transaction involving the Pittsburgh-based integrated steel producer is worth about $14.9 billion including the assumption of debt. The combined company will be among the top three steel-producing companies in the world, according to 2022 figures from the World Steel Association.

According to the Asian steel manufacturing company, their acquisition of the American corporation “will enhance its world-leading manufacturing and technology capabilities and enable it to expand the geographic areas.” Nippon added that the acquisition will allow it “to capitalize on the growing demand for high-grade steel, automotive and electrical steel, and provide excellent products and services.”

At $55 in cash, the deal is a 40 percent premium to the closing price of U.S. Steel shares on Friday. Shares of X are up 27 percent in premarket trading in New York, around $50 a share. Moreover, Big Tech Apple, Google’s parent Alphabet, Amazon, Microsoft and Nvidia trade at a valuation of more than $1 trillion each. Meanwhile, U.S. Steel, even at the sale price, was valued at less than 0.5 percent of the value of Apple and less than two percent of the value of Tesla.

The Associated Press reported that U.S. Steel’s price is nearly double what was offered at $7.25 billion just four months ago by rival Cleveland Cliffs and it rejected that offer. The transaction with Nippon is expected to close in the second or third quarter of next year and is also subject to approval by U.S. Steel’s shareholders. The news outlet also reported that U.S. Steel will keep its name and its headquarters in Pittsburgh, where it was founded in 1901 by J.P. Morgan and Andrew Carnegie. It will become a subsidiary of Nippon.

“Nippon Steel has a deep respect for U.S. steel, its history, and the contributions it has made to society,” said Takahiro Mori, Nippon executive vice president, during a conference call with investors Monday.

But the United Steelworkers union said it will fight the deal and it is urging that regulators block the sale of U.S. Steel to a foreign rival. “To say we’re disappointed in the announced deal between US Steel and Nippon is an understatement, as it demonstrates the same greedy, shortsighted attitude that has guided U.S. Steel for far too long,” the union’s President David McCall said. “We remained open throughout this process to working with U.S. Steel to keep this iconic American company domestically owned and operated, but instead it chose to push aside the concerns of its dedicated workforce and sell to a foreign-owned company.”

Pennsylvania Sen. John Fetterman slammed the deal and promised to work to block the transaction.”It’s absolutely outrageous that U.S. Steel has agreed to sell themselves to a foreign company,” the solon said in a statement. “Steel is always about security – both our national security and the economic security of our steel communities. I am committed to doing anything I can do, using my platform and my position, to block this foreign sale.”

Nippon defends brave step to buy U.S. Steel

Amid the criticisms, Nippon defended the 142 percent premium it is paying for the U.S. Steel Corp., as the Japanese company seeks to reinforce its position as a global titan, using expansion abroad to counter a weak domestic outlook, Bloomberg wrote. The statement came after the market found it surprising that the Japanese bidder had not previously been considered a front runner and the offer is more than double the level the American firm shares were trading at before it announced unsolicited proposals and a strategic review four months ago.

According to the news outlet, this has been the boldest effort by Japan’s top producer to shift focus abroad as its own crude steel manufacturing has been on a downward trend, with production falling to about 96 million tons in fiscal 2021 from about 122 million tons in fiscal 2007. “We want to complete a global network for a new era in the industry,” Eiji Hashimoto, Nippon Steel’s president, told the press in Japan on Tuesday, adding that the U.S. is an economic leader. “We believe that there is sufficient economic rationale.”

For Yuchen Huo, an analyst at BloombergNEF, the acquisition is a bigger move than all of Nippon Steel’s previously acquired capacities combined, building on the confidence over a subsidy-fueled manufacturing renaissance in the United States. (Related: World’s largest steel manufacturer to shutter plants in Germany amid catastrophic energy crisis.)

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