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US Steel accepts $14.1 billion Nippon bid after rejecting Cliffs

Bloomberg News | December 18, 2023 | 6:48 am Markets Asia USA Iron Ore

Credit: US Steel
Nippon Steel Corp. will buy United States Steel Corp. for $14.1 billion to create the world’s second-largest steel company — and the biggest outside of China — with a key role in supplying American manufacturers and automakers.


The deal caps months of uncertainty over the future of US Steel, an icon of American industry, which has been considering potential transactions since it rejected an offer from rival Cleveland-Cliffs Inc. for $7.25 billion in mid-August.

For Nippon, Japan’s biggest steel producer, the transaction provides a large foothold in the American steel industry at a time when domestic demand is poised to benefit from rising infrastructure spending. US Steel is a key supplier to the lucrative automotive market in particular. The Japanese company has been seeking growth overseas to offset a litany of challenges facing its current operations.

Nippon will pay $55 a share in cash, the companies said in a statement. The deal announced Monday is a 142% premium to US Steel’s share price on the last trading day before it announced the review and Cliffs revealed it had made a bid. The company’s shares jumped 25% to $49.30 at 9:36 a.m. in New York. Cliffs was up 7.2%.

The deal would create a steel giant with plants stretching from Slovakia to Osaka to Pennsylvania. It would be the world’s second-biggest steelmaker with more than 86 million tons of capacity, leapfrogging Luxembourg-headquartered ArcelorMittal SA, according to a company presentation and Bloomberg calculations. Only China’s state-owned China Baowu Steel Group Corp. would have more.


Nippon has been seeking growth abroad as it struggles with a slowdown in domestic demand, the rapidly weakening yen and a surge in competition across Asia. The firm has been shutting blast furnaces in Japan due to weak needs.

In a presentation, Nippon said it was expanding its US presence to benefit from a growing population, cheap energy and renewed focus on building infrastructure. The company said it had secured commitments to finance the transaction from Japanese banks.

For American industry, the takeover will mark the end of an era. US Steel traces its roots back to 1901 when J. Pierpont Morgan merged a collection of assets with Andrew Carnegie’s Carnegie Steel Co.

It has undergone a dramatic shift in recent years under CEO David B. Burritt, as its investment focus pivoted away from traditional blast-furnace production of steel from iron ore, toward more modern and less-polluting plants that remelt metal scrap instead.

The company took center stage in the global steel industry in August, when it revealed it had rejected an offer from Cliffs and begun a strategic review.

The announcement kicked off a dramatic few weeks, as the influential United Steelworkers union threw its support behind Cliffs’ pugnacious chief executive, while a little-known buyer startled the industry with an even larger offer, before abruptly pulling its interest days later.

As US Steel considered its options, analysts have speculated certain buyers would be more focused the firm’s Big River Steel plant in Arkansas, which uses the greener and more efficient modern electric arc furnaces, while seeking to offload the older blast furnace assets.

Nippon Steel executive vice president Takahiro Mori said Nippon’s plan is to continue with US Steel’s existing plans for the company, including completing the Big River project and continuing to operate the legacy steelmaking assets. Mori didn’t rule out changes down the road.

“We are supportive of US Steel’s plan,” Miro said in an interview. “After a few years we may think in another way, but at this moment we are just following the current plan.”

Passing CFIUS
The deal requires US Steel shareholder approval, and will need to clear regulators, including the Committee on Foreign Investment in the US, or CFIUS. Some US politicians had already come out criticizing the idea of a foreign purchaser of the iconic American company while US Steel was assessing potential bids.

Nippon’s Mori said he is confident on clearing the hurdle, pointing to Japan’s strong relationship with the US. “I don’t have any concern about passing CFIUS,” he said.

The two companies have agreed that US Steel will keep its name and headquarters. Nippon also said it will honor all agreements US Steel has with the USW, which has repeatedly said it won’t support any foreign bidders.

Relations between the USW and US Steel have remained strained. USW president David McCall said he received a call at 6 a.m. New York time from US Steel CEO Burritt, who left a voicemail. McCall said it would have been the first time he had spoken to the executive since becoming the union’s top official in September, following the death of former president Tom Conway.

“This is not how this is going to work,” McCall said in an interview. “We don’t know Nippon.”

The union has a transferable right — which it has said it would pass on to Cliffs — to counterbid after an offer for US Steel as part of its collective bargaining agreement.

However, Cliffs said in a statement it congratulated US Steel on the deal and wished it well with the transaction. Cliffs will refocus its capital allocation priorities towards more aggressive share buybacks, CEO Lourenco Goncalves said.

Citigroup Inc. is acting as financial adviser to Nippon Steel, while Barclays Plc, Goldman Sachs Group Inc. and Evercore Inc. are advising US Steel.

(By Joe Deaux, Eddie Spence and Stephen Stapczynski)

https://www.mining.com/web/nippon-steel-agrees-to-buy-us-steel-for-14-1-billion/