On Monday, Japan’s Nippon Steel (5401.T) announced its intention to acquire U.S. Steel (X.N) in a substantial deal valued at $14.9 billion, encompassing existing debt. This strategic move comes several months after U.S. Steel initiated the process of putting itself up for sale.
The proposed per-share offer of $55 signifies a considerable premium, marking an approximately 40% increase from U.S. Steel’s Friday closing price and an impressive 142% surge compared to the stock’s value before the company’s announcement of a strategic review process on August 11. Consequently, U.S. Steel’s shares experienced a significant 27% uptick in premarket trading.
Nippon Steel, currently positioned as the world’s fourth-largest steelmaker, perceives the U.S. market as a pivotal growth opportunity, serving as a counterbalance to the declining demand observed in Japan. As reported by the Nikkei daily, Nippon’s strategic move aligns with a broader vision to leverage the acquisition and propel the company toward achieving a global crude steel capacity of 100 million tonnes.
Having successfully secured financing commitments for the deal, Nippon Steel anticipates that this acquisition will position the company for substantial growth within the global steel industry. Importantly, Nippon Steel affirms its commitment to honoring all of U.S. Steel’s commitments with its employees, including existing collective bargaining agreements with unions.
The backdrop to this acquisition involves U.S. Steel’s formal review process initiated in August, subsequent to rejecting a $7.3 billion offer from rival Cleveland-Cliffs Inc (CLF.N). While Cliffs remained engaged in the sale process, ArcelorMittal SA (MT.LU), a major player in the steel industry, was also reportedly considering an offer.
Pittsburgh-based U.S. Steel faced challenges with falling revenue and profit over multiple quarters, rendering it an appealing target for competitors seeking to add a steel manufacturer catering to the automobile industry. Additionally, U.S. Steel’s supply to the renewable energy sector, coupled with potential benefits from the Inflation Reduction Act (IRA), which provides tax credits and incentives for such projects, has attracted suitors.
The article also notes that companies, including U.S. Steel, are anticipated to experience a robust start to 2024 as steel prices surge following the resolution of the United Auto Workers (UAW) union strike against the Detroit Three automakers.
Financial advisory roles are assigned to Citi for Nippon Steel Corporation (NSC) and to Barclays Capital, Goldman Sachs, and Evercore for U.S. Steel.
