U.S. Steel stock on Monday rocketed as much as 27% after the 122-year-old steelmaker agreed to be bought by a Japanese rival.
Nippon Steel Monday said it’s reached a deal to buy U.S. Steel after the 122-year-old Pittsburgh steelmaker put itself on the block. Nippon ranks as the largest steel maker in Japan.
Nippon Steel
5401,
announced it would pay U.S. Steel
X,
$14.1 billion, or $55 per share, which is a 40% premium. Including assumed debt, Nippon Steel is paying $14.9 billion.
U.S. Steel traded at $49.95 a share on Monday. If the gains hold, it’ll be the highest close for the stock since April 25, 2011, when it ended the session at $51.83 a share.
U.S. Steel will remain with its headquarters in Pittsburgh, along with retaining its “iconic name.” J.P. Morgan — the person, not the bank — founded the company in 1901, through the merger of several companies, including Andrew Carnegie’s Carnegie Steel Company.
U.S. Steel said in August it would explore options for its business after it rejected a takeover offer from Cleveland-Cliffs
CLF,
On its last conference call, U.S. Steel CEO David Burritt said it’s “coming down the other side of the mountain” after a ramp-up in capital spending.
Anticipating political roadblocks, both companies set up a website with the URL, www.BestDealforAmericanSteel.com.
On a conference call with analysts, the companies said they see the anti-trust review of the deal as a “low-level risk” because it will increase competition in the U.S. “with a great ally to the United States.”
Nippon Steel said it will honor all collective bargaining agreements with the United Steelworkers Union and that both boards have approved the deal.
The companies did not provide a dollar value estimate for cost-savings on the combination but said they would seek out synergies “driven by bringing together advanced production technology and know-how.”
Nippon Steel said it will be well-positioned to capitalize on the growing demand for high-grade steel, automotive and electrical steel, and provide excellent products and services. The deal caps off 40 years of Nippon Steel’s presence in the U.S., which started in a joint venture with Wheeling-Pittsburgh Steel in West Virginia.
The companies said the deal, which, will close in the second or third quarter of 2024, would create “significant value” for both companies.
Citi advised Nippon Steel, while Goldman Sachs and Evercore advised U.S. Steel.
The transaction is pending approval in an upcoming vote by U.S. Steel shareholders. The companies expect to close the deal in the second or third quarter of 2024.
This story originally appeared on Marketwatch
