U.S. Steel has agreed to be acquired by Japanese steelmaker Nippon Steel Corp. in a deal valued at nearly $15 billion.

“We believe this transaction is in the best interests of our two companies, providing strong, immediate value for U.S. Steel shareholders while enhancing NSC’s long-term growth prospects,” NSC Executive Vice President Takahiro Mori said in a statement Monday morning. “We have a strong balance sheet and are confident in our ability to unlock the potential of bringing together NSC and U.S. Steel through advancement in steelmaking, creating long-term value for our companies’ stakeholders, including our customers, employees, suppliers, communities, and shareholders.”

The deal for the iconic Pittsburgh steelmaker comes with an agreement for an all-cash transaction of $55 per share, representing an equity value of approximately $14.1 billion plus the assumption of debt, for a total value of $14.9 billion. The transaction was unanimously approved by the boards at NSC and U.S. Steel, officials said.

The sale’s announcement was met with swift disapproval from United Steelworkers International President David McCall, who said the union was left in the dark on negotiations. He called U.S. Steel leadership “greedy” and “shortsighted.” The Downtown-based union represents 11,000 employees at U.S. Steel.

“To say we’re disappointed in the announced deal between U.S. Steel and Nippon is an understatement,” Mr. McCall said in a prepared statement. “Neither U.S. Steel nor Nippon reached out to our union regarding the deal, which is in itself a violation of our partnership agreement that requires U.S. Steel to notify us of a change in control or business conditions.”

The union “intends to exercise the full measure of our agreements to ensure that whatever happens next with U.S. Steel, we protect the good, family-sustaining jobs we bargained,” he said, also calling on government regulators to “carefully scrutinize” the sale.

“Rest assured, our union will hold management at U.S. Steel accountable to every letter of our collective bargaining and other existing agreements.”

‘A watershed moment’ for Pittsburgh

U.S. Steel said over the summer it received “multiple, credible bidders” for the company, and it turned down Cleveland-Cliffs’ $7.3 billion takeover bid in mid-August. A second all-cash bid from privately held Sewickley-based Esmark Inc. soon followed; interest was also reported from ArcelorMittal, a Luxembourg-based multinational, and Charlotte-based Nucor Corp.

United Steelworkers said it exclusively supported Cleveland-Cliffs’ bid because of its potential to maintain blast furnace production and save union jobs.

Nippon Steel said it would honor all collective bargaining agreements in place with the company’s unions.

U.S. Steel had 22,740 employees worldwide at the end of last year, including 3,700 in southwestern Pennsylvania, where it operates its Clairton, Edgar Thomson, and Irvin plants, as well as the company’s corporate offices. 

Officials said U.S. Steel would keep its “name, brand and headquarters in Pittsburgh.”

Pittsburgh historian Bill Flanagan called the sale of the 122-year-old company “a watershed moment” for a city whose football team and blue-collar spirit were inspired by the steelmaker. He also noted a touch of irony.

“When I came to Pittsburgh in the 1980s, there were protests in the Mon Valley over the impact of Japanese-made steel on the domestic steel industry,” he said. “Rightly or wrongly, steel workers here in our region blamed foreign competition for the decline of the industry.”

After four decades of globalization, Mr. Flanagan said people are likely more receptive to the idea of Japanese investment.

“It's a different economy, it's a global economy,” he said, noting that other top Pittsburgh manufacturers, including Kraft Heinz and Covestro are owned by global companies. “Japanese companies have a strong presence here in the region in a variety of industries. So I think those emotions of 40 or 50 years ago are probably far behind us. Hopefully, people will welcome Nippon to Pittsburgh as an important player in the regional economy.”

That wasn’t exactly the reaction of U.S. Sen. John Fetterman, D-Pa., and other politicians who vowed Monday to fight the sale.

“It’s absolutely outrageous that they have sold themselves to a foreign nation,” he said in a video recorded outside his house, immediately across the street from U.S. Steel’s Edgar Thomson plant.

A goal of carbon neutrality

If the deal can win the approval of shareholders and regulators, the goal is to close on the acquisition by the second or third quarter of next year.

“I couldn’t be happier,” U.S. Steel CEO David Burritt said during a Monday press call. He called it “an exciting day” for his company and the broader steel industry. The $15 billion transaction was a 40% premium on Friday’s closing stock price for U.S. Steel, and a 142% premium since the bidding process began. In early morning trading Monday, U.S. Steel soared 26% and stayed at that level until the closing bell.

Mr. Burritt said several large projects boosted the company’s brand, including the state-of-the-art Big River 2 mini mill in Arkansas, set to start production next year. He said NSC was specifically interested in that mill’s capacity for electric steel, which will drive the electric vehicle transition.

Mr. Mori, the NSC representative, said both brands share a commitment to decarbonization, with a goal of carbon neutrality by 2050. He called the acquisition a “historic transaction” and said U.S. Steel is “the right partner to accelerate our ambitions as the best steel maker with world leading capabilities.”

NSC has been operating quietly in the U.S. for almost 40 years, starting with the purchase of 10% of Wheeling-Pittsburgh Steel in 1984. It has more than 600 USW-represented employees in the country, Mr. Burritt said. Now Japan’s largest steelmaker, NSC also oversees manufacturing in Brazil and Sweden.

Mr. Mori said his company will support U.S. Steel’s development of Big River 2, which may include closures of steel plants elsewhere. U.S. Steel idled its Granite City plant in November, threatening the jobs of over 1,000 workers. Earlier that month in Pittsburgh, it transitioned to a contract IT team, leading to over 100 layoffs.

The company said those efforts were separate from its strategic review, though analysts said a leaner company was a more attractive takeover.

Mr. Burritt said regulatory challenges are a “low level of risk,” given the competitive strength of domestic steel operations.  

“We will continue to operate our mining and steelmaking facilities in the U.S., for our U.S.-based customers. And we do not expect any reduction in the U.S. Steel asset base to close this transaction,” he said. “The bottom line on all this is that the combination is good for the United States and creates a more competitive market here with one of the United States’ greatest allies.”

A win for U.S. Steel shareholders

When news of a potential sale and bidding war began to swirl in August, many workers at the company’s Clairton mill worried that their dated operations, the largest in the U.S., wouldn’t be valued under a new owner. Some hoped Cliffs would win out, assuming the Ohio-based steelmaker would protect operations that mirror its plant just 50 miles to the north.

But analysts said that deal would have led to too much U.S. consolidation. Automakers publicly lobbied against the pairing.

Nippon’s deal is less likely to affect auto prices and more likely to breeze through antitrust challenges, KeyBanc Capital Markets analyst Philip Gibbs said.

“It checked all the boxes.”

Lawmakers had previously urged U.S. Steel not to consider offers from overseas. They may still challenge this sale on antitrust grounds, but Nippon has a strong defense, said Gimme Credit analyst Evan Mann.

“There may be some rustling from senators, because this administration seems to be more pro-union, pro-U.S,” he said. “But if they have very little market share here, then it's hard to argue that you're changing the dynamics of this marketplace.”

Nippon will likely allow U.S. Steel to be more competitive in a consolidated domestic market dominated by Cliffs, Nucor and Steel Dynamics, he added. The Japanese steelmaker could use its deep pockets to modernize the Mon Valley, if that fits into their blueprint, he said. U.S. Steel canceled $1.5 billion of planned improvements to Mon Valley operations in 2021 when it invested in Arkansas.

The deal is a win for U.S. Steel shareholders and validation of the company’s recent expansion efforts, Mr. Mann said.

“They've sort of staged a comeback and they've been doing a lot better,” he said.

It also showed the company’s ability to market itself, Mr. Gibbs said.

“They were really upselling everything and being very promotional in terms of what the business could accomplish,” he said.

A long history of jobs and pollution

While an American takeover might have been more politically palatable, it would have been more vulnerable to antitrust scrutiny, Mr. Gibbs said. By going with Nippon, U.S. Steel gets the best price on a deal that is likely to be approved.

Nippon was willing to pay “a very healthy premium” over its rivals because the purchase puts it significantly closer to its goal of 100 million tons of steel capacity, Mr. Gibbs said.

“You don't get many chances like this to make a dent, particularly in regions where you're not operating,” he said.

While Nippon’s vision for the Mon Valley isn’t entirely clear, the company’s desire for more U.S. output combined with its respect for current labor agreements appears to be favorable for Western Pennsylvania workers, Mr. Gibbs said.

“It ensures that the company is going to be well protected for a very long time to come,” he said. “These guys made such an aggressive offer, that they want to invest.”

Environmental groups are hoping that investment includes a commitment to cleaning up operations.

“U.S. Steel has a long history in Pittsburgh and has employed many, many people. It also has a long legacy of pollution, especially PM 2.5 (particulate matter) that has caused our residents cancer and respiratory problems,” the nonprofit Breathe Project said in a statement. “We hope that the new owner Nippon would understand the suffering that people have endured in the Mon valley and would do everything they can to produce greener, less polluting steel in the future.”

The statement added: “The sale displays a move by U.S. Steel management to pass off problems of old, leaking, outdated plants to a new owner while U.S. Steel shareholders cash out for a premium."

Patrick Campbell, the executive director of Group Against Smog and Pollution (GASP), said U.S. Steel’s facilities “have a troubling history of noncompliance with the Clean Air Act, so it's our hope that the company's new owners will make that a priority. Residents have dealt with industrial emissions and noxious odors from U.S. Steel's local operations for far too long."

Evan Robinson-Johnson: ejohnson@post-gazette.com and @sightsonwheels

First Published: December 18, 2023, 11:36 a.m.
Updated: December 19, 2023, 3:27 a.m.