The steel field ushered in a 100-billion-level merger and acquisition. On December 18, global steel giant Nippon Steel Corporation (hereinafter referred to as "Nippon Steel") announced the acquisition of a 122-year-old U.S. steel company for an equity value of $55 per share and a total price of $14.1 billion. Including debt, the deal is worth US$14.9 billion (106.3 billion yuan). The transaction confirms a purchase per share** representing a premium of approximately 40% to U.S. Steel's ** price on December 15.
The U.S. Steel Union was not happy with the acquisition, and they opposed the sale of the company to a Japanese company, preferring instead to be bought by Cleveland-Clift, also an American company. The United Steelworkers (USW) issued a statement on December 18 asking U.S. regulators to review the acquisition.
According to the announcement, the transaction is subject to regulatory approvals and is expected to close in the second or third quarter of 2024. According to Reuters, while most Japanese acquirers have had few problems closing the deal, CFIUS will review the deal. Given the limited overlap between Nippon Steel and U.S. Steel, the deal should not trigger antitrust scrutiny, analysts said. If the regulator vetoes the deal, Nippon Steel will pay U.S. Steel 5$6.5 billion break-up fee.
Upon completion of the transaction, Nippon Steel's global crude steel production capacity will increase to approximately 86 million tonnes per year. According to the World Steel Statistics 2023 released by the World Steel Association, Nippon Steel produced 44.37 million tons in 2022, ranking fourth in the worldU.S. Steel produced 14.49 million tons, ranking 27th in the world. The combined output of the two is 58.86 million tons, which will surpass Anshan Iron and Steel Group to reach the third place in the world, second only to China Baowu Iron and Steel Group and ArcelorMittal.
According to Reuters analysis, Nippon Steel's acquisition is a bet that the U.S. steel industry will benefit from the infrastructure bill introduced by the United States. In addition, Nippon Steel, the world's fourth-largest steelmaker, will significantly increase its crude steel production capacity after acquiring U.S. steel, while significantly increasing its production capacity in the United States.
The report quoted analysts at GLJ Research as saying Nippon Steel paid a higher ** for these assets. Nippon Steel paid the equivalent of 7.0 percent of U.S. Steel's 12-month earnings before interest, taxes, depreciation and amortization (EBITDA) according to the London** Stock Exchange3 times, the median of the steel industry is 7 times.
Founded in 1901 and headquartered in Pittsburgh, U.S. Steel was formed by the merger of more than a dozen companies such as Carnegie Steel, the "steel king" Carnegie, and United Steel, and was once the largest steel company in the United States, controlling 65% of U.S. steel production and successively annexing more than 50 enterprises.
U.S. Steel has a wide range of productions, including the mining of iron ore, coal and other non-ferrous metals, the manufacture of various steel pipes, steel plates, rails, chemical products, oil drilling and production equipment, etc., and its current crude steel production capacity is about 20 million tons.
In addition, U.S. Steel has the world's most advanced small electric arc furnace plant capable of producing high-quality steel, as well as its own iron ore mines in North America.
Due to factors such as the decline in the U.S. steel market, in the first three quarters of 2023, U.S. steel companies achieved revenue of 1390.9 billion US dollars (about 99.3 billion yuan), a year-on-year decrease of 1685%；Net profit 97.5 billion US dollars (about 7 billion yuan), a year-on-year decrease of 5851%。
Founded in 1970 and located in Chiyoda-ku, Tokyo, Japan, Nippon Steel is Japan's largest steel company, with its main factories located in Kimitsu City, Chiba Prefecture, Tokai City, Aichi Prefecture, Oita City, Oita Prefecture, Hikari City, Yamaguchi Prefecture, etc.
The steel giant has four business segments: Steelmaking & Steel Manufacturing, Engineering & Construction, Chemicals & Materials, and System Solutions. From the perspective of products, including cold-rolled steel plates, hot-rolled steel plates, rails, bars, pipes, axles and so on.
In fiscal year 2022 (April 2022-March 2023), Nippon Steel achieved revenue of about 8 trillion yen (about 395.3 billion yuan) and net profit attributable to the parent company of 694 billion yen (about 34.3 billion yuan).
The latest announcement predicts that Nippon Steel's revenue in fiscal 2023 will reach 9 trillion yen (about 444.7 billion yuan), an increase of about 10% year-on-year;The net profit attributable to the parent company was 420 billion yen (about 20.8 billion yuan), a year-on-year decrease of nearly 40%.
The acquisition of U.S. Steel follows Nippon Steel's joint acquisition of Essar Steel, a privately owned Indian steel company, in December 2019 with ArcelorMittal, and G Steel and GJ Steel in Thailand in March 2022.
According to the announcement, both Nippon Steel and U.S. Steel have pledged to decarbonize by 2050, and will promote cooperation in this area after the deal is concluded. At present, Nippon Steel has promoted decarbonization technology in three aspects, including blast furnace hydrogen injection technology, large-scale electric arc furnace production of high-quality steel technology, and hydrogen reduction technology.
As of December 19th, Nippon Steel shares were 281% at 3,148 yen;As of December 18, U.S. Steel Corporation**2609% to close at 49$59.
Comprehensive report by Beijing Business Daily.