U.S. Steel being acquired by Japan's Nippon Steel in deal worth $14.9 billion

TOKYO — Japan's Nippon Steel said Monday it plans to purchase U.S. Steel Corp., a longtime strategic supplier to the North American auto industry, in a deal worth $14.9 billion including debt.

U.S. Steel, a stalwart of American industry with roots stretching back more than a century, has been considering potential transactions since mid-August, after rejecting an offer from rival Cleveland-Cliffs Inc. for $7.25 billion.

In a meeting of its board of directors on Sunday, U.S. Steel deemed Nippon's $55-perh-share offer superior to a sale to Cleveland-Cliffs, which had raised its bid in the high $40-per-share range, sources told Reuters.

Nippon Steel is focusing on the U.S., which it sees as a growth market, amid sliding demand in the Japanese market due to the declining birth rate, a Nikkei report said. It would be the largest purchase ever for Nippon Steel, the paper said.

Nippon's offer is a 142 percent premium to U.S. Steel’s share price on the last trading day before it announced the review and Cliffs revealed it had made a bid. U.S. Steel's shares had suffered after several quarters of falling revenue and profit, making it an attractive takeover target for rivals looking to add a steelmaker used by the automobile industry.

The early Monday announcement follows a dramatic few weeks in the steel market, as the influential United Steelworkers union threw its support behind Cliffs’ pugnacious CEO, while a little-known buyer startled the industry with an even larger offer, before abruptly pulling its interest days later.

Nippon has secured financing commitments for the deal and expects it will enable the company to move toward 100 million tons of global crude steel capacity.

The companies said they agreed U.S. Steel will keep its name and headquarters in Pittsburgh.

All of U.S. Steel's commitments with its employees, including all collective bargaining agreements in place with its unions, will be honored, Nippon said.

But the union representing thousands of workers at U.S. Steel said on Monday it does not support the Nippon deal.

"To say we're disappointed in the announced deal between U.S. Steel and Nippon is an understatement," USW International President David McCall said in a statement.

Nippon's executive vice president, Takahiro Mori, told Reuters in an interview that the company had operated in the U.S. for 40 years and that it was confident the transaction would be completed.

"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," Mori said.

Nippon Steel also has an electric arc joint venture with ArcelorMittal in Alabama. Those operations are not unionized.

The transaction, which was reported by Nikkei earlier on Monday, is expected to close in the second or third quarter of 2024, subject to approvals.

U.S. Steel supplies the renewable energy industry and stands to benefit from the Inflation Reduction Act, which provides tax credits and other incentives for such projects, something that attracted suitors.

Companies such as U.S. Steel are also set for a strong start to 2024 as steel prices spike following a resolution of the UAW strikes against the Detroit 3 automakers.

U.S. Steel traces its roots back to 1901 when J. Pierpont Morgan merged a collection of assets with Andrew Carnegie’s Carnegie Steel Co. The company has undergone a dramatic shift in recent years under CEO David B. Burritt, as it pivoted away from traditional blast-furnace production of steel from iron ore, toward more modern and less-polluting plants that remelt metal scrap instead.

Reuters and Bloomberg contributed to this report.