US Steel to be bought by Japanese rival after takeover drama

Business
By Editor_1
US Steel Accepts $14.1 Billion Nippon Bid After Rejecting Cliffs - Bloomberg
By Michael J. De La Merced and Ana Swanson

NEW YORK – US Steel agreed Monday (18) to sell itself to Nippon Steel for $14.1 billion, capping months of speculation about the fate of the American industrial heavyweight.

US Steel, which was formed more than a century ago from a part of Andrew Carnegie’s industrial empire, has been weighing several takeover bids, including by domestic rival Cleveland-Cliffs. A little-known steel producer, Esmark, made an even larger bid — one that was light on details — before withdrawing days later.

In the end, U Steel chose an offer by one of its biggest global competitors that was worth significantly more than Cleveland-Cliffs’ initial offer: Nippon Steel will pay $55 a share in cash, compared with the $35 a share cash-and-stock bid that Cleveland-Cliffs made in August.

The combination with Nippon Steel would create “a truly global steel company with combined capabilities and innovation capable of meeting our customers’ evolving needs,” US Steel CEO David B. Burritt said in a statement.

The deal would add to Nippon Steel’s portfolio of plants around the world, and elevate the Japanese firm to be the world’s third-largest steelmaker, after China Baowu Group and ArcelorMittal, according to 2022 production figures from the World Steel Association.

US Steel, which was created by business magnates John Pierpont Morgan and Charles Schwab, has vastly reduced sway since its heyday. The acquisition would be a further consolidation for the US industry, which is made up of three other major companies: Cleveland-Cliffs, Nucor and Steel Dynamics.

The sale of a venerated American company to a foreign firm is especially notable given substantial efforts in Washington in recent years to prop up companies like US Steel.

US presidents have directed trade protections and subsidies at domestic steelmakers in recent years, to try to bolster the industry. President Donald Trump imposed a 25% tariff on most steel imports during his term. Trump and President Joe Biden later renegotiated many of those tariffs into quota arrangements, in which foreign governments agreed to limit the amount of steel they exported to the United States.

Steel has enjoyed a recent boom period under such protections and legislation such as the Bipartisan Infrastructure Law and the Inflation Reduction Act, which have helped drive up steel demand and prices by limiting competition from foreign markets.

But US steelmakers have struggled to compete against low-price, subsidized metals made by foreign competitors including China, which now accounts for more than half of global steel production.

The sale of US Steel is a symbolic coda for a major player in the growth of the US economy in the first half of the 20th century. Feats of American architecture and engineering such as Willis Tower in Chicago; New River Gorge Bridge near Fayetteville, West Virginia; and the United Nations Building in New York City were all built from products made by US Steel. The company supplied hundreds of millions of tons of steel to the US military during the most consequential conflicts of the 20th century.

But the company has faced challenges for decades because of intensifying foreign competition, and it has carried out multiple reorganizations and acquisitions to try to stay afloat. In an effort to diversify, US Steel acquired an oil company — Marathon Oil — in 1982, only to spin it off in 2001.

US Steel runs nearly two dozen facilities around the United States, as well as a steelmaking plant in Slovakia. The plants use massive machinery to transform molten steel into solid slabs, roll them into thinner sheets or bend them into tubes, and send them on to automakers, oil drillers and other industrial firms.

The United Steelworkers union, which represents most of the workers from US Steel, has reacted angrily to the prospect of being purchased by a foreign firm. It had said that it would accept offers only from Cleveland-Cliffs, which is also represented by the same union. The union ratified a four-year contract with US Steel in December 2022, which states that a buyer has to come to terms on a new labour agreement before it completes the acquisition.

In the deal announcement Monday, Nippon Steel said it would honour all agreements between US Steel and the union, including collective bargaining pacts.

The United Steelworkers slammed the company’s decision in a statement Monday, saying that it demonstrated “the same greedy, short-sighted attitude that has guided US Steel for far too long.”

“We remained open throughout this process to working with US Steel to keep this iconic American company domestically owned and operated, but instead, it chose to push aside the concerns of its dedicated workforce and sell to a foreign-owned company,” it said.

The union said it would urge government regulators to scrutinize the transaction to determine whether it served the country’s national security interests.

Analysts at BMO Capital Markets said Nippon Steel’s bid came as a surprise, and the price it offered was even “a bigger surprise,” representing a “hearty” valuation for US Steel. But the union’s resistance to the deal has “the potential to complicate the transaction,” they said.

-New York Times

 

 

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