American steel (NYSE:X) announced a deal to be acquired late last year. But the stock’s performance this year doesn’t look like what you would normally expect from a buyout candidate with a hefty premium.
Nippon steelThe $14.9 billion offer represented a nearly 40% premium to US Steel’s stock price at the time. But the $55 per share offer faced opposition from several parties, and US Steel shares have been essentially flat since the Japanese steelmaker’s bid last December.
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But shares rose this week as support for the deal grew. US Steel shares are up about 12% early Friday morning, according to data from US Steel S&P global market information.
Timing was perhaps the biggest obstacle to this potential deal. That’s because of the name US Steel and its iconic American history combined with the politics of the election year. But US Steel CEO David Burritt and Nippon management have defended the planned merger. Nippon has said it will invest $1 billion to help modernize the company’s facilities in Pennsylvania. US Steel is not in a financial position to invest that kind of capital.
In an effort to gain union support for the deal, Nippon executive vice president Takahiro Mori sent a letter to United Steelworkers union members this week, pledging not to import steel into the U.S. from its overseas factories. That could also help ease tensions with politicians from both parties. who have spoken out against the deal.
According to reports this week, Pennsylvania Governor Josh Shapiro met with Nippon CEO Mori to discuss the deal’s impact on US Steel’s Pittsburgh plants and its unions. Momentum appears to be building in favor of the deal as it continues to be reviewed by the Committee on Foreign Investment in the US
Nippon ownership will not change domestic steel production. Equipment is not moved; the plan is to modernize it. Several successful U.S. auto plants are owned by Japanese automakers, and this deal makes sense for everyone involved.
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