Shares of Nippon Steel rose following approval from the U.S. President for its $14.9 billion offer to acquire U.S. Steel, marking a major milestone after an 18-month pursuit and securing important access to a key market for the company’s growth plans.
The approval came after a challenging process that involved opposition from labor unions and two national security reviews. Nippon Steel, ranking as the fourth-largest steel producer globally, saw its shares climb by 3% to 2,915 yen by midday, outperforming the broader Tokyo stock market index, which increased by around 1%. The deal moved forward after an executive order allowed the acquisition to proceed, contingent on an agreement with the Treasury Department addressing national security concerns. The companies confirmed they had signed this agreement, effectively finalizing the transaction.
The arrangement includes commitments to invest $11 billion by 2028 and covers governance, production, and trade aspects. Nippon Steel will acquire full ownership of U.S. Steel’s ordinary shares.
Analysts noted that investors responded positively to the resolution of uncertainty around the deal. The investment size and timeline appear reasonable, with the acquisition playing a crucial role in Nippon Steel’s medium- to long-term growth objectives.
This transaction would increase Nippon Steel’s annual production capacity to 86 million metric tons, up from 63 million. Experts highlighted that the stock’s rise reflects expectations for long-term growth, fueled by preferred access to the U.S. market, where steel demand is anticipated to grow.
However, some concerns remain about potential financial pressure in the near term due to the large-scale investments. Additionally, questions have been raised regarding the extent of control the U.S. government might exercise through its “golden share” in the combined company.
While the possibility of a capital increase hasn’t been completely ruled out, it may be less severe than initially feared. Management risks related to the golden share are considered limited, as Nippon Steel expects growth in the U.S. market for premium products, reducing the likelihood of production cuts or job losses.
