Nippon Steel moves forward with $15 billion U.S. Steel acquisition

Nippon Steel nears completion of $15 billion U.S. Steel acquisition amid political scrutiny, aiming to reassure stakeholders and overcome challenges in the process.

Nippon Steel, the world’s fourth-largest steelmaker, is poised to finalise its anticipated $15 billion acquisition of U.S. Steel by the end of September, according to an executive’s statement on Wednesday. The acquisition has faced criticism from both Democratic and Republican U.S. lawmakers, as well as from the influential United Steelworkers (USW) union.

Former U.S. President Donald Trump, known for his protectionist “America First” policies, has vowed to block the deal if re-elected, underscoring the political tensions surrounding the acquisition.

In efforts to expedite the acquisition process, Nippon Steel has intensified discussions with various stakeholders, particularly labour unions, revealed Executive Vice President Takahiro Mori during a news conference. Last month, Mori engaged with U.S. Congress members to outline the benefits of the deal for American industry and workers. Mori expressed confidence that political considerations would not thwart a mutually beneficial project, highlighting the company’s employment of U.S. lobbyists to navigate potential hurdles.

Nippon Steel aims to secure approval from the USW by emphasising the positive impact of the acquisition on U.S. Steel’s profitability and financial stability, which in turn would lead to sustained employment opportunities. Both companies are actively pursuing regulatory approvals required in the U.S. and other jurisdictions. Nippon Steel intends to reach an agreement with the USW around the time of U.S. Steel’s shareholder meeting at the end of March.

The acquisition agreement stipulates a penalty of $565 million should either party terminate the deal. Nippon Steel, having secured a bridge loan of $16 billion from Japanese banks, is evaluating various financing options, including equity finance, to finalise the transaction.

The challenges encountered in the United States, Japan’s closest ally and a major destination for Japanese investment, have caused concerns among Japanese companies. Analysts suggest that Japanese firms may adopt a more cautious approach when considering future investments in the U.S.

Despite a 14.7% decline in net profit for April-December, Nippon Steel remains optimistic, revising its full-year profit forecast upwards. The company also raised its annual dividend forecast, reflecting its confidence in navigating challenges and capitalising on opportunities in the global steel market.