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US Steel (NYSE: $X) Agrees to Buyout by Nippon Steel

United States Steel Corporation Logo

US Steel (NYSE: X) produces steel products, including tubular and flat-rolled products. It serves customers in different industries, such as construction, automotive, distribution, and energy. The company was created in 1901 and was the largest in the US. On December 18, 2023, US Steel announced it had agreed to an acquisition by Japan’s Nippon Steel.

Details of Nippon Steel’s Acquisition

According to the announcement, US Steel and Nippon Steel Corporation (NSC) have entered into a definitive agreement for NSC to acquire US Steel in an all-cash transaction. The deal will see NSC shell out $55 per share for US Steel (X) and assume its total debt. Consequently, the deal is valued at $14.9 billion.

The $55 per share price is a 40% premium on the value of X’s closing share price on December 15, 2023. Both of the company’s boards unanimously approved the deal.

Previously, Cleveland-Cliffs had made a bid of $35 per share for U Steel on August 10, 2023. At the time, it was a 142% premium on the value of X shares based on their August 11 closing price. Cleveland-Cliffs’ bet was on US Steel benefiting from the Infrastructure Investment and Jobs Act, which authorizes up to $108 billion of spending in public transportation.

Earlier on, the United Steelworkers Union backed the bid from Cleveland Cliffs as it is a unionized company. The 11,000-strong union criticized the deal with Nippon. It says it will work to block the deal. Nippon has agreed to maintain US Steel’s agreements and contracts as part of the deal. It will also retain its name and maintain its Pittsburg, PA headquarters.

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Impact on X Stock

Soon after the deal was announced, US Steel (X) stock soared, closing 26.09% higher on December 18, 2023. However, Nippon Steel (TYO) stock took a 2.81% hit on its value, as is often the case with major acquisitions.

The Path to Approval

While the deal is on the path to completion, it still has a long way to go. First, it must overcome opposition from US Steel’s 1.2 million global workforce. It will also have to be approved by the Committee on Foreign Investments.

The committee takes up to 45 days to review a deal. After that, there is a 45-day investigation and a 15-day window for a presidential review. As such, the deal could be months away from approval.

In their press release, NSC and US Steel expressed hopes that the deal could be finalized by the third quarter of next year.

US Steel Stock Forecast

Wall Street analysts give X stock a hold rating. The analysts predict a high of $40 and a low of $4.36 for the stock. They give X stock an average price target of $26.71, a 46.14% decline based on its closing price.  

United States Steel Corporation Stock Performance

Should You Buy X Stock?

US Steel, over 100 years old, was once the most valuable company in the world. However, it has suffered a significant decline in recent years, with critics pointing to its lack of modernization of its processes and plants.

If Nippon injects modern processes and technology into US Steel, it could help turn the company’s fortunes around. The financial success of the deal will depend on how effective NSC is at cutting costs, market conditions, and various other factors. However, there is still the chance that the deal is not approved. However, even if that occurs, another buyer will likely step in with an offer of similar value.

In general, the hold rating accurately represents X stock based on all the factors above.

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