Quantfury Gazette

United States Steel Corporation (NYSE: X) is riding a $15 billion takeover rollercoaster

by
Nathan Crooks
Quantfury Team
US Steel

Shares of United States Steel Corporation (NYSE: X) have been on a rollercoaster with all the twists and turns. Last August, they had been trading just above $20 right before the company first disclosed it had received unsolicited takeover interest, and they quickly shot up before Japan’s Nippon Steel ultimately agreed to pay $55 in cash per share. Cleveland-Cliffs (NYSE: CLF) also entered the fray, submitting a $54 per share offer that was rejected. Current trading around $36 suggests the market doesn’t believe the deal will ultimately be approved by regulators. 

While shareholders of United States Steel Corporation overwhelmingly approved the all-cash transaction that promises a 40% premium, the deal is facing severe headwinds and potential regulatory hurdles with the United Steelworkers union worried about potential job cuts and President Joe Biden saying last month that the company should remain domestically-owned amid concerns that foreign control could jeopardize the strategically important industry. It’s an international dispute involving powerful lobbyists, politicians, and an American competitor also aiming to buy the Pittsburgh-based company, albeit at a lower price.

US-based Cleveland-Cliffs first announced its interest in acquiring the company last year, but its offer was turned down after Nippon Steel agreed to pay more. That hasn’t stopped the firm from waging a battle in the realm of public relations that’s at times involved colorful language and statements that United States Steel Corporation has labeled as “misinformation.”

“You cannot and will not close your announced deal with Nippon Steel,” Cleveland-Cliffs CEO Lourenco Goncalves said earlier this week, arguing that the transaction won’t be able to close without union support. United States Steel Corporation’s board of directors has pushed back, characterizing the statements as part of a “relentless and unbridled effort to derail the transaction” on the part of an unsuccessful bidder. It has also reaffirmed Nippon Steel’s agreement to honor existing labor agreements with unionized employees, keep the company’s name and maintain the headquarters in Pittsburgh. Proponents have maintained that Japan’s involvement in the North American steel market could invigorate it with fresh investment and improve competition.

In a move that requires nerves made of steel, Nippon Steel reaffirmed earlier this month that it still expects the deal to close.

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