Nippon Steel Justifies Acquisition of U.S. Steel at a Premium

Also, it is almost double the price of $7.25 billion offered by Cleveland-Cliffs in August this year.

SEATTLE (Scrap Monster): Japanese steelmaker Nippon Steel Corporation (NSC) has defended its decision to buy U.S. Steel at high premium. In a surprise announcement Monday, NSC had revealed its decision to buy U.S. Steel for $14.9 billion, thus leading to the creation of the world’s second largest steel producer after state-owned China Baowu Steel Group.

The purchase price represents a 142% premium to U.S. Steel’s share price on the day prior to which it announced strategic review. Also, it is almost double the price of $7.25 billion offered by Cleveland-Cliffs in August this year.

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According to Eiji Hashimoto, President, Nippon Steel, the acquisition is part of company’s efforts to shift focus on global steel industry, amidst weakening demand in Japan. It must be noted that the Japanese crude steel output has been on a downward trend, with output recording decline from 122 million tons in fiscal 2007 to around 96 million tons in fiscal 2021.

The transaction will provide Nippon Steel with a large foothold in the American steel industry. It will now have plants stretching from Slovakia to Osaka and Pennsylvania. The combined entity would have a steelmaking capacity of 86 million tons per year, the company said.

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