Image source: United States Steel

United States Steel Corporation (NYSE: X) is up 25% today after Nippon Steel Corp (TYO: 5401) said it will buy the integrated steel producer for $14.9 billion.

Details of Nippon-U.S. Steel deal

The all-cash agreement values each share of U.S. Steel at $55 – more than 150% premium on their year-to-date low in early June.

Nippon Steel has already secured financing commitments to move forward with the acquisition, as per its press release on Monday.

The Japanese firm expects this transaction to help expand its footprint in the United States where accelerated production of automobiles is expected to result in a material increase in steel prices in the coming months.

Acquiring U.S. Steel brings Nippon closer to global crude steel capacity of 100 million tonnes as well. Shares of the Tokyo-headquartered firm ended in the red today.

Could Nippon face regulatory hurdles?

Note that Nippon Steel has been operating in the U.S. since the 1980s. Takahiro Mori – its Executive Vice President said in an interview with Reuters on Monday:

 

Standard Steel that we own is a union company in the United States, we have a good history of working with unions. We see no regulatory or antitrust issues with the deal.

Nippon also confirmed in its press release today that it plans on honoring all commitments of the United States Steel Corporation that reported its third-quarter financial results in late October.

With steel prices in US at $1100 currently, $X earns almost 4 billion in EBITDA in '24 without BRS 2. Takes the risk out even before the deal closes. It's not cheap, but its not terrible. https://t.co/Q08JEBybVm

— Aggressive Value (@aggresivevalue) December 18, 2023

Its net earnings came in down 37.3% (sequentially) in Q3. Wall Street currently has a consensus “hold” rating on $X.

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