US Steel Accepts Nippon’s $14.1 Billion Offer After Rejecting Cliffs

Nippon Steel Corp. has successfully secured a deal to acquire United States Steel Corp. for $14.1 billion, creating the world’s second-largest steel company and the largest outside of China. This move comes after US Steel rejected a $7.25 billion bid from rival Cleveland-Cliffs Inc. in August.

The acquisition by Nippon Steel, Japan’s leading steel producer, provides a significant entry into the American steel industry, strategically positioning the company amid a potential uptick in domestic demand driven by increased infrastructure spending. US Steel plays a crucial role as a supplier to the lucrative American automotive market, making this acquisition particularly valuable for Nippon Steel as it seeks overseas growth to counter challenges faced by its current operations.

Under the terms of the deal announced on Monday, Nippon will pay $55 per share in cash, representing a substantial 142% premium to US Steel’s share price on the last trading day before the review process began. This move caused US Steel’s shares to surge by 25% to $49.30, while Cleveland-Cliffs saw a 7.2% increase.

The resulting company from this acquisition will become a steel giant with operations spanning from Slovakia to Osaka to Pennsylvania, boasting over 86 million tons of capacity. This places it as the world’s second-largest steelmaker, surpassing Luxembourg-based ArcelorMittal SA and trailing only China’s state-owned China Baowu Steel Group Corp.

For Nippon Steel, expanding its presence in the US aligns with its strategy to tap into a growing population, leverage cheap energy, and participate in renewed infrastructure development. The Japanese company has secured commitments to finance the transaction from Japanese banks.

The takeover marks the end of an era for American industry as US Steel, with roots dating back to 1901, undergoes a transformation under the leadership of CEO David B. Burritt. In recent years, the company shifted its investment focus toward modern, less-polluting plants that remelt metal scrap, departing from traditional blast-furnace production. VozVozVozVozVozVoz

The deal now awaits approval from US Steel shareholders and regulatory clearance, including scrutiny from the Committee on Foreign Investment in the US (CFIUS). While some US politicians have expressed concerns about a foreign buyer for this iconic American company, Nippon Steel’s Executive Vice President, Takahiro Mori, expresses confidence in clearing CFIUS, citing Japan’s strong relationship with the US.

The agreement includes commitments to retain US Steel’s name and headquarters, and Nippon will honor existing agreements with the United Steelworkers union. Despite strained relations between the union and US Steel, Nippon plans to follow through with US Steel’s existing plans for the company, including completing the Big River project and continuing to operate legacy steelmaking assets.