Japanese steel giant Nippon has announced plans to buy US Steel in a deal worth nearly $15bn (£12bn).
The purchase would create one of the world's biggest steel companies outside of China and resolve questions about the future of the storied US firm. It has been looking for a buyer since August, when it rejected a smaller, unsolicited bid from a US rival.
The United Steelworkers union called the deal “shortsighted” and said it would work to block the takeover. Created in 1901 by business titans Andrew Carnegie and JP Morgan, US Steel at its height was one of the biggest companies in the world, powered by America's growth and industrialisation.
But like the wider US steel industry, its dominance has eroded over decades in the face of cheaper foreign competition. Today it employs more than 22,000 people globally, including more than 14,000 in the US.
The larger Nippon said the purchase would enhance its long-term growth prospects by expanding its footprint in the US, where the industry is expected to grow, boosted by recent government investments in infrastructure and electric cars.
Nippon said it would honour existing contracts with US Steel union workers and the company would retain its name, brand and headquarters in Pittsburgh.
“[Nippon has] a proven track record of acquiring, operating, and investing in steel mill facilities globally,” said US Steel chief David Burritt, adding he was confident that the combination was “best for all”.
“Today's announcement also benefits the United States – ensuring a competitive, domestic steel industry, while strengthening our presence globally,” he said.
But the union representing steelworkers said it did not want to see the company sold to a foreign buyer.
“We remained open throughout this process to working with US Steel to keep this iconic American company domestically owned and operated, but instead it chose to push aside the concerns of its dedicated workforce and sell to a foreign-owned company,” said United Steelworkers president David McCall.
“To say we're disappointed in the announced deal between US Steel and Nippon is an understatement, as it demonstrates the same greedy, shortsighted attitude that has guided US Steel for far too long.”
US Steel said it expected the purchase to be completed in the second or third quarter of next year. The boards of both companies have already approved the deal, which will now go to shareholders and regulators.
Under the terms announced on Monday, Nippon has agreed to pay $55 per share and take on the company's debt, a deal worth $14.9bn together. The deal values US Steel shares at more than double the price they fetched when the review began.
It is also higher than an offer made by US-based Cleveland Cliffs of more than $7bn, which the union had supported. Mr McCall said the union would urge regulators to scrutinise the transaction to see if it “serves the national security interests of the United States and benefits workers”.
The union has proven to be a powerful political force in recent years, helping to convince former US President Donald Trump to put tariffs on steel from many foreign countries to protect the domestic industry.
President Joe Biden has kept many of those measures in place, while rolling back some, including on Japan. Analyst Gerald Johnson, chief executive at GLJ Research, said the introduction of a new player – Nippon – into the US steel industry is likely to make it more competitive, and could lead to layoffs eventually.
But while the government is likely to review the deal, Mr Johnson said he did not expect it to block it, given the high price that Nippon has agreed. Shares in US Steel surged, while Nippon's fell after the announcement.
Mr Johnson said Nippon was “grossly overpaying” noting that US steel had been “underperforming” for many years. He said Nippon could stomach paying more in part because of lower financing costs in Japan.
— CutC by bbc.com
