U.S. Steel (X) -) shares soared higher Monday after Japan's Nippon Steel agreed to acquire the steelmaking group for around $15 billion.
Nippon said it would pay $55 a share, about $14.1 billion, for U.S. Steel, a near 40% premium to the Pittsburgh group's Friday closing price. Including debt, the overall deal values U.S. Steel at around $14.9 billion.
The purchase would give Nippon Steel, the world's fourth-largest steel company, a major foothold in the world's biggest economy.
U.S. Steel, which launched a strategic review of its operations in early August, rejected offers from both U.S. rival Cleveland-Cliffs (CLF) -) and privately held Esmark, which value it at around $7.85 billion. France's ArcelorMittal (MT) -) also reportedly was interested in U.S. Steel.
"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," U.S. Steel CEO David Burritt said in a statement.
"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."
U.S. Steel shares were marked 26.53% higher in early Monday trading to change hands at $49.68 each. Cleveland-Cliffs shares, meanwhile, were marked 8.6% higher at $20.30 each.
U.S. Steel-Nippon Steel pact may face challenges
Nippon Steel said it would honor all current agreements on wages and working conditions reached with the United Steelworkers Union, but the USW was harsh in its criticism of the deal, saying it demonstrates the same "greedy, shortsighted attitude that has guided U.S. Steel for far too long."
“Neither U.S. Steel nor Nippon reached out to our union regarding the deal, which is in itself a violation of our partnership agreement that requires U.S. Steel to notify us of a change in control or business conditions," the Union said.
“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," the USW added. "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."
The sale could also face separate legal and political challenges, however, after Senator J.D. Vance (R-Ohio) earlier this year pushed the group to sell to an American buyer.
In an open letter to the group in August, Vance urged Burritt to consider "the effects of any decision to America’s industrial base and national security and insist that you reject any bids to acquire U.S. Steel or its assets from a foreign entity."
The Committee on Foreign Investment in the U.S., better-known as CFIUS, is also expected to examine the deal, particularly given that the company stands to benefit from taxpayer funds linked to the Inflation Reduction Act.
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