December 2023 | Nippon Steel has announced its expected completion of the acquisition of US Steel by the third quarter of 2024. The definitive agreement, signaling a major strategic move, was made with a USD55 per share bid, reflecting a substantial 40% premium over the US steelmaker’s closing price on December 15. This bold bid values the entirety of US Steel’s operations at USD14.9 billion, including the assumption of its existing debt.
By combining forces, NSC and U.S. Steel seek to fortify a diversified and competitive steel industry in the U.S., benefitting customers through collaborative investment in innovative steel solutions. Under this agreement, U.S. Steel retains its name and headquarters in Pittsburgh, PA, symbolizing a continuation of its esteemed legacy.
NSC emphasized its commitment to honoring all collective bargaining agreements with the United Steelworkers Union, and a dedication to robust stakeholder relations.
Unanimous Board Approval
The transaction received unanimous approval from the boards of directors at both Nippon Steel and US Steel, setting the stage for a crucial investor presentation scheduled for December 19. The agreement puts an end to months of speculation regarding the future ownership of US Steel. Earlier, in August, a USD35 per share bid from Cleveland-Cliffs, among other potential suitors, was rejected, with suggestions that a merger involving Cleveland-Cliffs and US Steel could have triggered regulatory scrutiny.
In October, a letter to Congress and US regulators from the Alliance for Automotive Innovation raised concerns that such a merger could force up the price of steel. It warned that 100% of the metal needed to produce electric vehicle motors, known as e-steel, would be produced by a joint Cleveland-Cliffs/US Steel operation. It would also produce a dominant share of the market for steel used to produce car body panels, it said.
Strategic Growth and Automotive Sector Leverage
Nippon Steel is strategically positioned to leverage US Steel’s presence in the automotive steel sector. With the recent resolution of the United Auto Workers (UAW) strikes targeting the ‘Detroit Three’ in November, suppliers to the US automotive sector are anticipating a robust start to 2024. According to MEPS’s December price analysis, flat steel prices are continuing to rise in both the United States and Canada.
Nippon’s Global Steel Expansion
Currently the world’s fourth-largest steel producer, Nippon Steel produced 44.4 million tonnes in 2022, experiencing a 10% year-on-year decrease.
The acquisition of US Steel is anticipated to propel Nippon’s annual crude steel capacity to 86 million tonnes, advancing the company toward its strategic goal of reaching an annual production capacity of 100 million tonnes.
Green Transition and Carbon Neutrality Commitment
US Steel is set to enhance its EAF-based steel production capacity through the Big River 2 development near Osceola, Arkansas. The USD240 million operation aims to produce three million tonnes of low-emissions steel annually upon completion.
Both Nippon Steel and US Steel share a commitment to achieving carbon neutrality by 2050. Their strategies include utilizing hydrogen injection technology in blast furnaces, incorporating hydrogen in the Direct Reduced Iron (DRI) process, and producing high-grade steel in large Electric Arc Furnaces (EAFs).
Benefits from Government Incentives
As contributors to the renewable energy industry, these green initiatives, along with future developments from US Steel, stand to benefit from the US government’s Inflation Reduction Act (IRA), providing valuable tax credits and other incentives.
NSC President Eiji Hashimoto, said
“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. NSC has long admired U. S. Steel with deep respect for its advanced technologies, rich history, and talented workforce and we believe we can jointly take on the challenge of raising our aspirations to even greater heights. The transaction builds on our presence in the United States and we are committed to honoring all of U. S. Steel’s existing union contracts. We look forward to collaborating closely with the U. S. Steel team to bring together the best of our companies and move forward together as the ‘Best Steelmaker with World-Leading Capabilities’.”
President and Chief Executive Officer of U. S. Steel, David B. Burritt said,
“NSC has a proven track record of acquiring, operating, and investing in steel mill facilities globally – and we are confident that, like our strategy, this combination is truly Best for All. This transaction realizes the tremendous value today in our company and is the result of our Board of Directors’ comprehensive and thorough strategic alternatives process. For our U. S. Steel employees, who I continue to be thankful for, the transaction combines like-minded steel companies with an unwavering focus on safety, shared goals, values, and strategies underpinned by rich histories. For customers, U. S. Steel and NSC create a truly global steel company with combined capabilities and innovation capable of meeting our customers’ evolving needs. Today’s announcement also benefits the United States – ensuring a competitive, domestic steel industry, while strengthening our presence globally. Our shared decarbonization focus is expected to enhance and accelerate our ability to provide customers with innovative steel solutions to meet sustainability goals.”