(Bloomberg) — Nippon Steel Corp. agreed to buy United States Steel Corp. for $14.1 billion in cash, in a deal to end months of uncertainty about the future of the historic American metal producer.
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US 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. The announcement kicked off a dramatic few weeks in the steel market, as the influential United Steelworkers union threw its support behind Cliffs’ pugnacious chief executive, while a little-known buyer startled the industry with an even larger offer, before abruptly pulling its interest days later.
Nippon will pay $55 a share in cash, the companies said in a statement. The deal is a 142% premium to US Steel’s share price on the last trading day before it announced the review and Cliffs revealed it had made a bid. The company’s shares jumped 28% in premarket trading to $50.50.
Nippon Steel, Japan’s top producer and the fourth-largest in the world, has been seeking growth overseas to offset a litany of challenges facing its current operations. The deal will give it a significant foothold in the American steel industry, and particularly the profitable automotive market where US Steel is a key supplier.
The deal would create a steel giant with plants stretching from Slovakia to Osaka to Pennsylvania. Nippon has been seeking growth abroad as it struggles with a slowdown in domestic demand, the rapidly weakening yen and a surge in competition across Asia. The firm has been shutting blast furnaces in Japan due to weak needs, and eyeing overseas assets for growth at the same time.
The companies have agreed that US Steel will keep its name and headquarters, they said in the statement on Monday. Nippon also said it will honor all agreements US Steel has with the United Steelworkers union, which has repeatedly said it won’t support any foreign bidders.
US 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 its investment focus pivoted away from traditional blast-furnace production of steel from iron ore, toward more modern and less-polluting plants that remelt metal scrap instead.
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