On Monday, Nippon Steel of Japan announced its intention to acquire U.S. Steel in a deal valued at $14.9 billion, including debt. This decision follows U.S. Steel’s formal review process initiated months ago, which garnered interest from various parties.
The proposed per-share offer of $55 represents a premium of around 40% over U.S. Steel’s Friday closing price and an impressive 142% compared to the stock’s closing price before the company disclosed its strategic review process on August 11. Consequently, U.S. Steel’s shares surged by 27% in premarket trading.
Nippon Steel, currently the world’s fourth-largest steelmaker, views the U.S. as a strategic growth market, providing an opportunity to counteract declining demand in Japan. The deal, reportedly confirmed by Nikkei daily, positions Nippon to achieve 100 million tonnes of global crude steel capacity, backed by secured financing commitments.
All existing commitments with U.S. Steel’s employees, including collective bargaining agreements with unions, will be honored, according to Nippon Steel.
Earlier in August, U.S. Steel initiated a review process after rejecting a $7.3 billion offer from Cleveland-Cliffs Inc. While Cleveland-Cliffs continued its involvement in the sale process, ArcelorMittal SA, a steelmaking giant, was reportedly considering an offer as well.
The strategic move by Nippon Steel aligns with the global trend of industry consolidation, with U.S. Steel presenting an attractive prospect due to its standing as a major steel supplier to the automotive industry. U.S. Steel also holds a position in the renewable energy sector, standing to benefit from the Inflation Reduction Act (IRA), which provides tax credits and incentives for related projects.
Moreover, companies like U.S. Steel anticipate a robust start to 2024, fueled by the spike in steel prices following the resolution of the United Auto Workers (UAW) union strike against the Detroit Three automakers.
In terms of advisory roles, Citi is serving as the financial adviser to Nippon Steel Corporation (NSC), while Barclays Capital, Goldman Sachs, and Evercore are acting as financial advisers to U.S. Steel.