Japan Nippon Steel clinched a deal on Monday to buy U.S. Steel for $14.9 billion in cash, prevailing in an auction for the 122-year-old iconic steelmaker over rivals including Cleveland-Cliffs, ArcelorMittal and Nucor. The deal price of $55 per share represents a whopping 142% premium to Aug. 11, the last trading day before Cleveland-Cliffs unveiled a $35-per-share, cash-and-stock bid for U.S. Steel, which had been valued at just $4.3 billion.
The acquisition of the world’s fourth-largest steelmaker will help Nippon move toward 100 million metric tons of global crude steel capacity and significantly expand production in the United States, where steel prices are expected to rise as automakers ramp up production following their recent deals with labor unions to end strikes. Nippon said it would honor all of U.S. Steel’s commitments with employees and expects to generate synergies from pooling advanced production technology and know-how in product development, operations, energy savings, and recycling.
It is the biggest deal in the steel industry this year, bringing together companies that are both the world’s biggest outside of China and the most profitable. It also creates one of the top four producers globally and gives Nippon a foothold in supplying high-value metals for wind turbines and solar panels. This area could help offset some of the weakening demand for steel for construction projects and car production.
Nippon said the acquisition would strengthen its position as a global supplier of premium products to automotive, aerospace, and energy industries, adding that it aims to increase its sales in these markets by 40% and boost profit by 50% by 2024. Nippon also plans to make U.S. Steel a fully-owned subsidiary with its headquarters in Pittsburgh, where the company was founded in 1901.
The transaction will be subject to approval from the Committee on Foreign Investment in the United States, a government panel that reviews deals for national security concerns. The deal is expected to close in the second or third quarter of 2024. The company’s financial advisers are Citi, Barclays Capital, Goldman Sachs, and Evercore.
Some lawmakers from Rust Belt states, where the deal will be most felt, have already slammed it. Pennsylvania Democratic Senator John Fetterman, who represents Braddock, where one of the ailing steel plants is located, called for government regulators to scrutinize it and determine whether it serves the national security interests of the United States and benefits workers.