Nippon Steel of Japan to Purchase US Steel in a Nearly $15 Billion Deal

U.S. Steel, the iconic Pittsburgh steelmaker that was once the largest corporation in the world, has agreed to a buyout proposal from Japan’s Nippon Steel for a total value of $14.9 billion.

The deal, unveiled on Monday morning, would make U.S. Steel a wholly owned subsidiary of Nippon Steel. The Japanese steel giant offers an all-cash transaction with a price of $55 per share, which represents a 40 percent premium to U.S. Steel’s closing stock price on Friday.

As part of the agreement, U.S. Steel will retain its name and its headquarters in Pittsburgh, where it was founded in 1901. Nippon Steel also said it will honor all collective bargaining agreements that are already in place with the United Steelworkers (USW) as part of its commitment to “maintaining strong stakeholder relations.”

Nippon Steel, which will pay an equity value of approximately $14.1 billion plus $0.8 billion in the assumption of debt for the largest acquisition in the company’s history, called it a worthwhile investment that aligns with its overseas business strategy. With the takeover, Nippon Steel is expected to further enhance its U.S. operations alongside Japan, India, and Southeast Asia, where the company sees “significant” market volume and growth potential.

According to the World Steel Association, Nippon Steel ranked fourth globally in terms of steel production last year. U.S. Steel ranked 27th.

The transaction has been unanimously approved by the boards of directors of both companies. The goal is to close on the acquisition by the second or third quarter of calendar year 2024, subject to approval by U.S. Steel’s shareholders.

“We are excited that this transaction brings together two companies with world-leading technologies and manufacturing capabilities, demonstrating our mission to serve customers worldwide, as well as our commitment to building a more environmentally friendly society through the decarbonization of steel,” Nippon Steel President Eiji Hashimoto said in a statement.

“We are confident that, like our strategy, this combination is truly best for all,” said U.S. Steel CEO David Burritt.

Other Bids

Monday’s deal comes four months after U.S. Steel turned down a takeover bid from rival Cleveland-Cliffs, which offered $7.3 billion based on $17.50 a share, less than half of the price tag placed by Nippon Steel. Just a day after Cleveland-Cliffs went public with its offer, Sewickley, Pennsylvania-based Esmark Inc. also unveiled an all-cash offer for all of U.S. Steel for $35 per share.

The USW, a labor union representing 14,000 workers at Cleveland-Cliffs and 11,000 at U.S. Steel, backed Cleveland-Cliffs’s bid over the promise of keeping all the existing bargaining deals and the potential to maintain blast furnace production.

In response to the announced deal between U.S. Steel and Nippon Steel, the USW said it was disappointed by what it sees as a “greedy, shortsighted attitude.”

“Neither U.S. Steel nor Nippon reached out to our union regarding the deal, which is in itself a violation of our partnership agreement that requires U.S. Steel to notify us of a change in control or business conditions,” the union said in a statement.

“Based on this alone, the USW does not believe that Nippon understands the full breadth of the obligations of all our agreements, and we do not know whether it has the capacity to live up to our existing contract.”

In November, U.S. Steel indefinitely idled operations at its plant in Granite City, Illinois, laying off more than 1,000 workers. The company said the decision was meant “to help ensure melt capacity is balanced with our order book.”

The Granite City mill produces “high-quality hot-rolled, cold-rolled and coated sheet steel products” for the construction, container, piping, and tubing industries in addition to automotive, according to the company’s website. In September, U.S. Steel temporarily shut down its last operating blast furnace at the Granite City site in an attempt to mitigate risk in the wake of the then-ongoing United Auto Workers strike with the Big Three automakers.

“With the auto worker strike impacting the order book in the fourth quarter, we acted to ensure that our melt capacity is in line with demand. We remain nimble, enabling us to maintain profitability as we manage through uncertain market conditions,” Mr. Burritt told investors during an earnings call at the time.

Monday’s deal did not mention any plan to revive the Granite City mill. Nippon Steel did, however, vow to support U.S. Steel’s development of Big River 2 near Osceola, Arkansas. The new technologically advanced flat rolled steelmaking facility will recycle, refine, and process scrap steel into finished steel products.

According to Mr. Burritt, the Japanese partner was specifically interested in Big River 2’s capacity for electrical steel, which plays a key role in electric vehicles. The facility is set to start production in 2024.