Nippon Steel acquires US Steel in a $14.9bn deal
In a move that could shake up the steel industry, Nippon Steel has agreed to buy US Steel in a $14.9bn deal, marking the largest-ever acquisition by the Japanese group as it targets the American market.
Nippon Steel will pay $55 a share in cash for the Pittsburgh-based company, representing a 40% premium to US Steel’s closing share price on Friday. The offer has surged US Steel’s shares by 26.1% to close at $49.59.
The acquisition comes after US Steel rebuffed a $7.3bn offer from domestic rival Cleveland-Cliffs in August. Nippon Steel’s winning offer, valuing US Steel’s equity at $14.1bn, follows a tradition of Japanese companies paying handsomely for overseas acquisitions.
However, the deal has received criticism from some quarters. A fund manager holding Nippon Steel shares said the deal looked “terrible” for shareholders, while the United Steelworkers union reacted furiously, saying that neither US Steel nor Nippon Steel had consulted it.
Despite the pushback, Nippon Steel, which employs more than 106,000 people, has promised to honor US Steel’s collective bargaining agreements and other employee commitments.
The transaction will need to be approved by US competition authorities at a time when much of the country’s steel industry has consolidated, leaving Cleveland-Cliffs, Nucor, Steel Dynamics, and US Steel as the four large players.
Although there might be some pushback to the takeover from critics on national security grounds, some experts believe that unless Nippon Steel moves assets out of the US, there shouldn’t be any issues with the acquisition.
The deal has been advised by Citigroup for Nippon Steel, and by Goldman Sachs and Barclays for US Steel.
It remains to be seen how the acquisition, which has been driven by Nippon Steel’s excitement over combining two companies with world-leading technologies and manufacturing capabilities, will play out in the long term.
Additional reporting by Taylor Nicole Rogers in New York.