Takeover is expected to boost Japanese group’s manufacturing capacity before price hike
18 December 2023 - 15:39
byShivansh Tiwary
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
U.S. STEEL-M&A NIPPON STEEL FILE PHOTO: The logos of Nippon Steel Corp. are displayed at the company headquarters in Tokyo, Japan March 18, 2019. Picture taken March 18, 2019. REUTERS/Yuka Obayashi/File Photo Image: Yuka Obayashi
Tokyo — Japan’s Nippon Steel said on Monday it will buy US Steel in a deal valued at $14.9bn, adding significant capacity in a key market that is primed for a price hike.
US Steel’s share price rose about 28% to $50.35 in premarket trade, and was trading well below the offer price of $55. That represented a premium of 142% since the company announced a strategic review process on Aug. 11.
The all-cash offer represents an equity value of about $14.1bn. The world’s fourth-largest steelmaker said it had secured financing commitments to fund the transaction.
The deal is expected to help Nippon move towards 100-million tonnes of global crude steel capacity, while significantly expanding production in the US, where steel prices are expected to rise as carmakers ramp up production after their recent deals with labour unions to end strikes.
All US Steel commitments with its workers, including all collective bargaining agreements with unions, will be honoured, said Nippon.
Nippon executive vice-president Takahiro Mori said the group operated in the US for 40 years and was confident the transaction would be completed.
“Standard Steel that we own is a union company in the US. We have a good history of working with unions. We see no regulatory or antitrust issues with the deal,” said Mori.
Nippon Steel also has an electric arc joint venture with ArcelorMittal in Alabama. Those operations are not unionised.
Pittsburgh-based US Steel’s share price wilted after several quarters of falling revenue and profit, making it an attractive takeover target for rivals looking to add a maker of steel used by the automobile industry.
In mid-August, US Steel launched a formal review process, after rebuffing a $7.3bn offer from rival Cleveland-Cliffs Inc.
US Steel also supplies to the renewable energy industry and stands to benefit from the Inflation Reduction Act (IRA), which provides tax credits and other incentives for such projects, something that attracted suitors.
The transaction, reported by Nikkei on Monday, is expected to close in the second or third quarter of 2024, subject to approvals.
Citi is the financial adviser to NSC, while Barclays Capital, Goldman Sachs and Evercore are financial advisers to US Steel.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Nippon Steel to buy US Steel in $14.9bn deal
Takeover is expected to boost Japanese group’s manufacturing capacity before price hike
Image: Yuka Obayashi
Tokyo — Japan’s Nippon Steel said on Monday it will buy US Steel in a deal valued at $14.9bn, adding significant capacity in a key market that is primed for a price hike.
US Steel’s share price rose about 28% to $50.35 in premarket trade, and was trading well below the offer price of $55. That represented a premium of 142% since the company announced a strategic review process on Aug. 11.
The all-cash offer represents an equity value of about $14.1bn. The world’s fourth-largest steelmaker said it had secured financing commitments to fund the transaction.
The deal is expected to help Nippon move towards 100-million tonnes of global crude steel capacity, while significantly expanding production in the US, where steel prices are expected to rise as carmakers ramp up production after their recent deals with labour unions to end strikes.
All US Steel commitments with its workers, including all collective bargaining agreements with unions, will be honoured, said Nippon.
Nippon executive vice-president Takahiro Mori said the group operated in the US for 40 years and was confident the transaction would be completed.
“Standard Steel that we own is a union company in the US. We have a good history of working with unions. We see no regulatory or antitrust issues with the deal,” said Mori.
Nippon Steel also has an electric arc joint venture with ArcelorMittal in Alabama. Those operations are not unionised.
Pittsburgh-based US Steel’s share price wilted after several quarters of falling revenue and profit, making it an attractive takeover target for rivals looking to add a maker of steel used by the automobile industry.
In mid-August, US Steel launched a formal review process, after rebuffing a $7.3bn offer from rival Cleveland-Cliffs Inc.
US Steel also supplies to the renewable energy industry and stands to benefit from the Inflation Reduction Act (IRA), which provides tax credits and other incentives for such projects, something that attracted suitors.
The transaction, reported by Nikkei on Monday, is expected to close in the second or third quarter of 2024, subject to approvals.
Citi is the financial adviser to NSC, while Barclays Capital, Goldman Sachs and Evercore are financial advisers to US Steel.
Reuters
Why Nippon Steel is suing Toyota and China’s Baoshan Iron & Steel
Nippon Steel snubs South Korean lawyers in wartime labour fight
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Related Articles
Thyssenkrupp posts $2.3bn impairment on steel business
Business-to-business trading drives Argent’s profit growth
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.