Nippon Steel to acquire US Steel for $14.9 billion cash in cross-pacific deal

Company News

by Glenn Dyer

US Steel, America's iconic steelmaker, is set to be acquired by the Japanese giant, Nippon Steel, for $14.9 billion in cash (more than $A22 billion) in a deal that will be welcomed on both sides of the Pacific.

Thirty or forty years ago, the fear of Japanese business strength would have caused mayhem in US politics and business circles in both Japan and America. If it had been a major Chinese steelmaker buying US Steel, there would have been enormous controversy. However, Japanese companies have lost their image of being all-powerful over the decades.

Major Japanese carmakers like Toyota, Honda, and Nissan have invested tens of billions of dollars in the US, with billions more to come in new investments in batteries, EVs, and associated infrastructure. All are major steel consumers and are significant customers of Nippon Steel in Japan.

Nippon Steel has been chosen by US Steel's board and management instead of the larger US group, Nucor, which makes steel via the electric arc furnace method rather than blast furnaces, as US Steel and Nippon do.

US iron ore and steel group, Cleveland Cliffs, was ignored. Global giant, ArcelorMittal, was another rival interested in buying US Steel but was also ignored.

The deal price of $55 a share represents a massive 142% premium to August 11, the last trading day before Cleveland-Cliffs unveiled a $35-per-share, cash-and-stock bid for US Steel.

Cleveland-Cliffs' pursuit prompted US Steel to launch a sale process four months ago. In a meeting of its board of directors on Sunday, US Steel chose Nippon's offer as superior to a sale to Cleveland-Cliffs, which had raised its bid in the high $40-a-share range, according to US market sources quoted by CNBC.

Nucor offered to acquire U.S. Steel in partnership with another company, but the identity of that company could not be learned, and US analysts said that it would have taken a long time to close due to asset sales required to get past US competition regulatory rules on vertical mergers.

ArcelorMittal also pursued US Steel, as reported by Reuters.

Nippon and ArcelorMittal own a plant in Alabama that produces steel sheet products by processing semi-finished products, or slabs, procured from local and overseas suppliers. They are also investing about $1 billion in an electric arc furnace operation.

Nippon will likely have to sell that interest to gain approval to buy US Steel.

CNBC stated that the acquisition of US Steel will help Nippon, the world's fourth-largest steelmaker, move toward 100 million metric tons of global crude steel capacity while significantly expanding its production in the United States. This expansion comes as steel prices are expected to rise due to automakers ramping up production following recent deals with labor unions to end strikes.

Nippon Steel has assured that all of US Steel's commitments with its employees, including all collective bargaining agreements with its union, will be honored.

Despite these assurances, the United Steelworkers union, which had endorsed the heavily unionised Cliffs as the acquirer, opposes the sale to Nippon because it lacks faith in labor agreements being upheld.

Australia's BlueScope has a $1 billion-plus electric arc furnace operation at North Star in Ohio, along with associated processing facilities and significant coated products and rolling plants.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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