Storied U.S. Steel to be acquired for more than $14 billion by Nippon Steel
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Updated: 3:38 p.m.
U.S. Steel, the Pittsburgh-based steel producer that played a key role in the nation's industrialization, is being acquired by Nippon Steel in an all-cash deal valued at about $14.1 billion.
The transaction is worth about $14.9 billion when including the assumption of debt. The combined company — pending regulatory and shareholder approval — will be among the top three steel-producing companies in the world, according to 2022 figures from the World Steel Association.
The price tag for U.S. Steel is nearly double what was offered just four months ago by rival Cleveland-Cliffs. U.S. Steel, which rejected that offer, confirmed the offering price from Nippon early Monday.
U.S. Steel employs hundreds of people at its taconite operations on the Iron Range, including Minntac in Mountain Iron and Keetac in Keewatin. It also owns a 15 percent stake in Hibbing Taconite, which is operated by Cleveland-Cliffs.
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U.S. Steel executives were asked Monday about a potential pushback from U.S. regulators over security concerns.
“This is going to increase competition here in the United States with a great ally to the United States," answered U.S. Steel CEO David Burritt. “It’s a great fit and we do not see that as a high level risk factor. We’d say low level of risk.”
U.S. Steel will keep its name and its headquarters in Pittsburgh, where it was founded in 1901 by J.P. Morgan, Andrew Carnegie. It will become a subsidiary of Nippon.
Nippon said Monday that it will also honor all collective bargaining agreements in place with the United Steelworkers and other employees, and is committed to maintaining its relationship with workers. Nippon has had a presence in the U.S. for almost 40 years, starting with a joint venture with Wheeling-Pittsburgh Steel in 1984 that later became a wholly owned subsidiary.
But USW International President David McCall issued a statement blasting the planned deal.
The deal “demonstrates the same greedy, shortsighted attitude that has guided U.S. Steel for far too long,” McCall wrote. “We remained open throughout this process to working with U.S. 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.”
McCall claimed that neither company reached out to the union about their plans, and that the lack of notification violates the USW’s agreement with U.S. Steel.
“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,” he wrote. “This includes not just the day-to-day commitments of our labor agreement, but also significant obligations to fund pension and retiree insurance benefits that are the most extensive in the domestic steel industry.”
USW officials —including union leaders in Minnesota— backed a takeover proposal by Cleveland-Cliffs, which owns three taconite mines and processing plants on the Iron Range, and is majority owner of Hibbing Taconite.
Republican state legislators who represent portions of the Iron Range expressed cautious optimism about the proposed sale.
“I am encouraged Nippon has said they will honor the collective bargaining agreements already in place for employees. However, I remain concerned this iconic American company is being sold to a foreign company,” said Sen. Robert Farnsworth of Hibbing.
“Economic diversity on the Iron Range is a good thing,” added Rep. Spencer Igo of Wabana Township, who represents communities on the western Iron Range.
"Whenever you have two companies or more competing against each other, that's going to drive worker pay, that's going to drive worker collective bargaining, that's the thing that's going to keep strong families up here on the Range,” he said.
Steel industry consolidation
Soaring prices have helped fuel consolidation in the steel industry this decade. Steel prices more than quadrupled near the start of the pandemic to near $2,000 per metric ton by the summer of 2021 as supply chains experienced gridlock, a symptom of surging demand for goods and the lack of anticipation of that demand.
Nippon, which will pay $55 per share for U.S. Steel, said Monday that the deal will bolster its manufacturing and technology capabilities. It will also expand Nippon's production in the U.S. and add to its positions in Japan, India and the ASEAN region.
Nippon said the acquisition is anticipated to 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 U. S. Steel’s existing union contracts,” Nippon President Eiji Hashimoto said in a prepared statement.
Burritt, the U.S. Steel CEO, said that the sale is beneficial to the United States, “ensuring a competitive, domestic steel industry, while strengthening our presence globally.” The company will continue to run its mining and steel operations in the U.S. for its domestic customers, he said during a conference call Monday.
The acquisition has been approved by the boards of both companies and is targeted to close in the second or third quarter of 2024. It still needs approval from U.S. Steel shareholders.
Shares of United States Steel Corp. soared more than 28 percent before the opening bell Monday.