US Steel announced on Monday (December 18) that they have agreed to be acquired by Nippon Steel in an all-cash deal valued at approximately $14.1 billion.
Fortune reported that the price tag for US Steel was nearly double of what was offered just four months ago by rival Cleveland Cliffs, which the company rejected.
The company - founded in 1901 by JP Morgan and Andrew Carnegie - played a key role in the industrialization of the US. While already acquired, US Steel would keep its name and headquarters. Nippon said that it would also honor all collective bargaining agreements in place with the United Steelworkers and other employees, and expressed its commitment to maintaining its relationship with workers.
Increases in steel prices have helped fuel consolidation in the steel industry in the 2020s so far, as prices more than quadrupled near the start of the pandemic to nearly $2,000 per metric ton by the summer of 2021 as supply chains experienced a gridlock, a symptom of surging demand for goods and the lack of anticipation of that demand.
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Nippon Pays $55 Per US Steel Share
It was revealed that Nippon would pay $55 per US Steel share and that the deal would bolster its manufacturing and technology capabilities. Before the opening bell on Monday, US Steel's shares soared by more than 27%.
The acquisition would also bolster US Steel's manufacturing and technology capabilities, while at the same time, expanding Nippon's production and market in the US in addition to its operations in Japan, India, and the ASEAN region.
Nippon vice president Takahiro Mori told Reuters that the company had already operated in the United States for 40 years and expressed confidence that the deal would be finalized smoothly.
"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," he said. "We see no regulatory or antitrust issues with the deal."
Nippon added that buying US Steel would bring its total annual crude steel capacity to 86 million tons and help it capitalize on growing demand for high-grade steel, automotive, and electrical steel.
"The transaction builds on our presence in the United States and we are committed to honoring all of US Steel's existing union contracts," Nippon president Eiji Hashimoto said in a statement.
Meanwhile, US Steel CEO David Burritt said that the sale was beneficial for the United States as it would ensure "a competitive, domestic steel industry while strengthening our presence globally."
The acquisition process has been targeted to close in the second or third quarter of 2024.
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