In a monumental move, Japan’s steel giant, Nippon, has unveiled plans to acquire US Steel in a groundbreaking deal valued at nearly $15 billion (£12 billion).

This strategic acquisition is poised to establish one of the world’s largest steel conglomerates outside of China, marking a pivotal moment for both companies and the global steel industry.

US Steel, a company with a storied history dating back to its founding in 1901 by industrial titans Andrew Carnegie and JP Morgan, has been seeking a buyer since August.

The decision to reject a smaller, unsolicited bid from a US rival prompted speculation about the future trajectory of the iconic American firm.

Once a titan of industry at the zenith of America’s growth and industrialization, US Steel, like the broader US steel sector, has faced challenges from relentless foreign competition, leading to a gradual erosion of its dominance over the decades.

The proposed acquisition by Nippon, a steel industry giant with a global footprint, aims to bolster its long-term growth prospects by expanding its presence in the United States.

This move comes at a time when the US steel industry is expected to experience growth, fueled by recent government investments in infrastructure and the burgeoning electric car sector.

Nippon’s commitment to preserving existing contracts with US Steel’s union workers and retaining the company’s name, brand, and headquarters in Pittsburgh aims to assuage concerns about potential job losses or a departure from the company’s historical roots.

David Burritt, Chief Executive of US Steel, expressed confidence in the deal, stating that Nippon’s proven track record in managing steel mill facilities globally makes the combination the “best for all” parties involved.

He emphasized that the acquisition would not only ensure a competitive domestic steel industry but also strengthen the company’s global presence.

However, the United Steelworkers union, representing the dedicated workforce of US Steel, strongly opposes the acquisition.

Labeling the deal as “shortsighted” and driven by greed, the union’s president, David McCall, expressed disappointment.

The union, a potent political force, vows to work towards blocking the takeover, emphasizing the importance of keeping the iconic American company domestically owned and operated.

Under the terms of the agreement, Nippon will pay $55 per share and absorb US Steel’s debt, resulting in a total deal worth $14.9 billion.

This valuation represents more than double the price of US Steel shares when the review process commenced. Notably, this offer surpasses a $7 billion bid from US-based Cleveland Cliffs, which the union had initially supported.

The deal has received approval from the boards of both companies and is set to undergo scrutiny from shareholders and regulators.

The transaction’s expected completion in the second or third quarter of the coming year hinges on these approvals.

The powerful political influence of the United Steelworkers union, which played a role in the imposition of steel tariffs during the Trump era, may lead to regulatory scrutiny.

The union intends to urge regulators to assess the transaction’s impact on national security interests and worker benefits.

While some analysts anticipate increased competitiveness in the US steel industry with the entry of Nippon, concerns linger about potential layoffs.

Gerald Johnson, CEO of GLJ Research, suggests that despite government scrutiny, the high price agreed upon by Nippon is unlikely to lead to the deal being blocked.

US Steel’s shares surged in response to the announcement, while Nippon’s shares experienced a decline, with some analysts noting that Nippon might be perceived as “grossly overpaying” for a company that has underperformed in recent years.

The impact of this groundbreaking acquisition on the global steel landscape remains a focal point for industry observers and stakeholders alike.

Last Updated: 19 December 2023