(New York) The Japanese groups Nippon Steel and American US Steel announced on Monday their next merger, a transaction worth approximately $14.1 billion (excluding debt) which greatly displeases the American steel union.
This acquisition by the Japanese steel giant is to be made all in cash at a price of $55 per share, a premium of 40% compared to the closing price of US Steel’s shares on Friday, according to the press release of the two groups.
Nippon Steel, which will finance this acquisition through already approved bank loans, also intends to take over the American group’s debt, bringing the total amount of the operation to $14.9 billion.
Both boards of directors unanimously approved the agreement, which remains subject to approval by US Steel shareholders and regulatory authorities.
Finalization is expected, at the latest, in the third quarter of 2024.
US Steel (USS) launched a strategic review in August after receiving several unsolicited offers for a partial or total buyout.
At the time, it rejected an offer from its American competitor, Cleveland-Cliffs, which valued the merger at around $10 billion.
The USW metalworkers union then indicated that it supported the agreement proposed by Cleveland-Cliffs. Union President Thomas Conway had said the USW would not support any group other than Cliffs.
“To say that we are disappointed by the announced agreement between US Steel and Nippon is an understatement, as it illustrates the same greedy and short-term attitude that has guided US Steel for far too long,” commented the union president for international David McCall, in a press release.
“We remained open throughout the process to work with US Steel to keep this iconic American company under American ownership” but management “chose to ignore the concerns” of employees, he continued.
Disgruntled union
According to him, neither group has contacted the union about this transaction “which, in itself, is in violation of our agreement” with US Steel management.
All agreements concluded between US Steel and the USW union will be respected, the companies assured Monday, specifying that the American group would notably retain its name and its headquarters in Pittsburgh (Pennsylvania) following the merger.
The collective agreement between the union and management is valid until 2028.
This acquisition will significantly increase Nippon Steel’s current production in the United States.
“Through NSC’s (Nippon Steel Corporation) acquisition of US Steel, its total planned annual crude steel production capacity will reach 86 million tons, accelerating progress toward NSC’s strategic goal of 100 million tons of global crude steel capacity per year,” according to their press release.
The Japanese group currently produces around 60 million tonnes.
“Our common goal in terms of decarbonization should improve and accelerate our ability to provide our customers with innovative steel solutions to achieve sustainable development goals,” assured the two groups, which were aiming, before their marriage, for carbon neutrality in 2050.
US Steel’s appeal, according to analysts and industry players, comes from the fact that the company is close to finalizing a costly investment plan, including the installation of electric arc furnaces instead of blast furnaces coal, in order to reduce its carbon footprint.
The two groups expect to generate synergies – undisclosed – through the pooling of their production technologies, their knowledge as well as through energy savings and recycling.
Nippon Steel, present for around forty years in the United States where it employs around 4,000 people – including 620 members of the USW – out of a total of around 106,000 employees worldwide, also has production infrastructures in Japan. , in India, Brazil, Thailand and Sweden.
USS’s industrial base, founded in 1901 and which had nearly 23,000 employees at the end of 2022, is located in the United States and Slovakia.
Shortly before 11 a.m., USS shares jumped 26.49% to $49.75 on the New York Stock Exchange. That of Nippon Steel ended down 1.07% in Tokyo.