Japan’s Nippon Steel has secured a monumental deal to acquire US Steel for $14.9 billion in cash, outbidding competitors Cleveland-Cliffs and ArcelorMittal in a high-stakes auction. This acquisition marks a strategic move for Nippon Steel, propelling it to a global crude steel capacity of 100 million tonnes, positioning it as the world’s fourth-largest steelmaker.
The deal, priced at $55 per share, represents a significant 142% premium to Aug. 11, the last trading day before Cleveland-Cliffs proposed a $35-per-share cash-and-stock bid for US Steel. The latter responded by initiating a sale process, ultimately favoring Nippon Steel’s offer over Cleveland-Cliffs.
The acquisition is expected to enhance Nippon Steel’s production capabilities in the United States, where rising steel prices are anticipated due to increased production by automakers following recent labor union agreements.
Takahiro Mori, Nippon Steel’s Executive Vice President, expressed confidence in the transaction, emphasizing the company’s 40-year history in the United States. Mori stated that Nippon Steel sees no regulatory or antitrust hurdles, and all commitments with US Steel employees, including union agreements, will be honored.
Gordon Johnson, an analyst at GLJ Research, expressed reservations about the deal, suggesting that Nippon Steel might be overpaying for the assets in the cyclical steel industry.
The transaction is slated to conclude in the second or third quarter of 2024, pending regulatory approvals, with the Committee on Foreign Investment in the United States expected to scrutinize the deal. Financial advisers for the deal include Citi for Nippon, and Barclays Capital, Goldman Sachs, and Evercore for US Steel.
By Reuters
