U.S. Steel will be acquired by Japan’s Nippon in $14.1 B deal

Japan’s largest steelmaker, Nippon Steel, won its bid to purchase U.S. Steel, a deal valued at $14.1 billion that will put the legacy American company in the hands of a foreign firm.

The purchase, announced Monday, comes months after failed bids by domestic competitors Cleveland-Cliffs and Esmark, which tried to purchase U.S. Steel for $7.3 billion and $10 billion, respectively.

The combination will make Nippon the second-largest steel company, trailing only China Baowu Group.

U.S. Steel will retain its name after the acquisition and remain in Pittsburgh, where it was founded in 1901 by J.P. Morgan, Andrew Carnegie and Charles Schwab, according to a statement.

The United Steelworkers Union, which represents many of the company’s workers, condemned in a statement U.S. Steel’s decision to sell to a foreign entity as “greedy” and “shortsighted.”

U.S. Steel did not contact the union before making the deal, the union statement said.

“Our union intends to exercise the full measure of our agreements to ensure that whatever happens next with U.S. Steel, we protect the good, family-sustaining jobs we bargained,” the union wrote.

It also urged regulators to scrutinize the purchase as a threat to national security.

The union ratified a four-year contract in December 2022, which states that a new labor contract must be agreed upon before an acquisition is completed.

Nippon said it will honor all of U.S. Steel’s existing union contracts.

Under the deal, Nippon will purchase the company in an all-cash transaction that values U.S. Steel at $55 a share – a 40 percent premium from the stock’s closing price on Friday.

U.S. Steel shares rose sharply on the news, breaking $50 a share during intraday trading, and closing at an increase of 26%.

In a statement, U.S. Steel said the transaction is expected to close in the second or third quarter of 2024.

Nippon’s expansion in the United States could serve as a blow to American steelmakers that would prefer to consolidate the market among themselves, said Gordon Johnson, an analyst at GLJ Research.

“This is a win for the guys who buy steel for the U.S., but this is a huge loss in my view for the American steel mills despite the stocks trading extremely strongly,” Johnson said.

Reflecting rising optimism about the industry, the shares of competitor Cleveland-Cliffs rose 10% on Monday following the news.

U.S. Steel is one of the country’s most storied companies, founded by the titans of industry who drove U.S. industrialization in the 20th century, from railroads to oil to banking.

It was the first billion-dollar corporation in American history – at one point the most valuable company in the world.

In its first year, it produced 29% of the steel made globally.

But the giant has been in decline for years.

Last year, it employed just 15,000 employees and produced just 11.2 million tons of steel, less than a third of its 1953 output.

For decades, policymakers and American presidents have tried to buoy U.S. Steel’s prospects of survival.

Former president Donald Trump implemented a 25% tariff on steel imports during his time in office; most recently, President Biden’s Inflation Reduction Act sought to boost steel manufacturing domestically.

Republican and Democratic lawmakers alike railed against the acquisition on Monday.

“I warned of this outcome years ago and will oppose it in the months ahead,” Sen. J.D. Vance, R-Ohio, said in a statement.

“The acquisition of U.S. Steel by a foreign company is wrong for workers and wrong for Pennsylvania. I’m gonna do everything I can to block it,” Sen. John Fetterman, D-Pa., said on X. He called the deal “absolutely outrageous.”