U.S. Steel Settles Dispute - Analyst Blog

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Finally, U.S. Steel Corp . ( X ) and the Canadian government reached a settlement to end a court dispute over the company's 2007 takeover of steelmaker Stelco Inc .

Canadian government took Pittsburgh-based U.S. Steel to court in 2009 under the country's foreign-takeover laws. According to the lawsuit filed, the company broke its commitments to operate its Canadian facilities to the "net benefit" of Canada as spelled out in U.S. Steel's 2007 acquisition of Stelco. The government was upset when U.S. Steel scaled back operations in 2009.

Further, U.S. Steel challenged lawsuit, arguing that Ottawa's actions, such as introducing the idea of a $10,000-a-day fine against the company, violated the Charter of Rights and Freedoms. The case marked the first legal challenge to the Investment Canada Act.

U.S. Steel agreed to maintain operations in Canada until 2015 and make C$50 million ($48.7 million) in additional capital investments beyond the C$200 million it originally promised.

Further, U. S. Steel also committed to make financial contributions of $3 million toward community and educational programs in Hamilton and Nanticoke, which will start immediately. U. S. Steel will contribute $1 million by early February 2012.

Going forward, this settlement signifies that U. S. Steel will continue operations in Canada while providing economic benefit to the communities of Hamilton and Nanticoke.

U.S. Steel, the largest U.S. steelmaker by volume, will continue to operate at the Lake Erie and Hamilton plants in Ontario until 2015, according to the statement. It will also contribute C$3 million toward community and education programs in Hamilton and Nanticoke.

In October 2011, U. S. Steel reported third-quarter 2011 adjusted net income of $118 million or 72 cents per share, exceeding the Zacks Consensus Estimate of 55 cents per share.

The net income excluded $96 million or 57 cents per share of net foreign currency losses, primarily related to the accounting re-measurement of the inter company loans. Including this, net income came in at $22 million, or 15 cents per diluted share versus net loss of $51 million or loss of 35 cents per diluted share.

U.S. Steel competes with international steel giants like ArcelorMittal ( MT ), BaoSteel , Posco ( PKX ), Nippon Steel and ThyssenKrupp .

We maintain our Neutral recommendation on United Steel with its quantitative Zacks #3 Rank (short-term Hold rating).

ARCELOR MITTAL ( MT ): Free Stock Analysis Report

POSCO-ADR ( PKX ): Free Stock Analysis Report

UTD STATES STL ( X ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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