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Japan’s Nippon Steel Set to Acquire U.S. Steel for USD 14.9 Billion in Cash

U.S. Steel has been sold to Japan’s Nippon Steel for USD 14.9 billion in cash outbidding Cleveland-Cliffs,  ArcelorMittal, and Nucor. Nippon’s acquisition marks its move toward 100 million metric tons of global crude steel capacity, while significantly expanding its production in the United States.

Dec 19, 2023

nippon steel

Japan’s Nippon Steel secured a USD 14.9 billion deal in cash to acquire U.S. Steel, outbidding Cleveland-Cliffs and ArcelorMittal. Nippon aims to enhance global steel capacity and expand U.S. production, anticipating rising steel prices. U.S. Steel’s board preferred Nippon’s offer over Cleveland-Cliffs, which raised its bid. Nucor, the largest U.S. steel maker, in partnership with a company also tried to acquire the company. As per reports, ArcelorMittal also tried to acquire U.S. Steel. The acquisition will help Nippon, the world’s fourth-largest steelmaker, move towards 100 million metric tons of global crude steel capacity, while significantly expanding its production in the United States. Nippon did not provide synergy projections but mentioned benefits from advanced technology, product development, operations, energy savings, and recycling. Despite concerns about overpayment, Nippon is paying 7.3 times U.S. Steel’s EBITDA, leading analysts to question the deal’s value. The median in the steelmaking industry is seven times, and some analysts said U.S. Steel was worth less given that its USD 774 million takeover of the Big River steel mill in Arkansas in 2021 has yet to pay off in profitability. Mr. Gordon Johnson, analyst at GLJ Research, said, “We feel Nippon is overpaying for those assets. This isn’t the technology space. This is still the cyclical steel industry.”

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Although Nippon assured that All of U.S. Steel’s commitments with its employees, including all collective bargaining agreements in place with its union, will be honored, the United Steelworkers opposes the sale, fearing labor agreement breaches.  United Steelworkers 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.” Mr. Takahiro Mori, Nippon’s Executive Vice President, said in an interview, “Standard Steel and Wheeling Nippon Steel that we own are unionized companies in the United States; we have a good history of working with unions. We see no regulatory or antitrust issues with the deal.”  U.S. Steel, founded in 1901, faced underperformance, making it an attractive target. Beyond automakers, U.S. Steel supplies the renewable energy industry, attracting suitors. The transaction with Nippon is expected to close in the second or third quarter of 2024, subject to regulatory approvals, U.S. Steel said. The Committee on Foreign Investment in the United States, a U.S. panel that scrutinizes deals for potential national security risks, is expected to review the transaction, though most Japanese acquirers complete their deals with few issues. Citi is a financial adviser to Nippon, while Barclays Capital, Goldman Sachs, and Evercore are the financial advisers to U. S. Steel.

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