United States Steel Corporation X and Nippon Steel Corporation (“NSC”) have officially entered into a definitive agreement. Per the terms, NSC will acquire U.S. Steel in an all-cash deal at $55 per share. This transaction — valued at approximately $14.1 billion-plus assumed debt and equating to a total enterprise value of $14.9 billion — represents a significant development in the steel industry.
The purchase price of $55 per share marks a substantial 40% premium over U.S. Steel's closing stock price as of Dec 15, 2023. The board of directors of HNSC and U.S. Steel have unanimously approved the transaction.
NSC's strategic move to acquire U.S. Steel is aimed at augmenting its global manufacturing and technology capabilities. The acquisition will facilitate an expansion of NSC's geographical reach, allowing it to better serve stakeholders, including customers and society at large. This strategic expansion will notably increase NSC's production in the United States, complementing its existing strongholds in Japan, ASEAN and India.
With the acquisition, NSC's anticipated total annual crude steel capacity is projected to reach 86 million tons, aligning with its strategic objective of achieving 100 million tons of global crude steel capacity annually.
The transaction is slated to conclude in the second or the third quarter of the calendar year 2024, subject to approval by U.S. Steel's shareholders, customary regulatory approvals and other standard closing conditions. NSC secured financing commitments from certain Japanese banks to fund the acquisition, with plans to proceed mainly through borrowings. The transaction is not contingent on any financing conditions, underscoring the confidence and commitment of NSC in finalizing this transformative deal.
United States Steel Corporation Price and Consensus
NSC underscored the synergies arising from the transaction, emphasizing the amalgamation of cutting-edge technologies and manufacturing capabilities. Commending U.S. Steel's technological prowess, historical legacy and skilled workforce, NSC expressed confidence in mutually elevated aspirations. The commitment to honor existing union contracts was reiterated. NSC looks forward to collaborative endeavors with U.S. Steel to solidify its position as the 'Best Steelmaker with World-Leading Capabilities.'
Emphasizing the transaction's strategic alignment with both companies' interests, NSC highlighted its immediate value for U.S. Steel shareholders and the prospective enhancement of long-term growth for NSC. The company expressed confidence in leveraging advancements in steelmaking to unlock potential and create enduring value for various stakeholders, encompassing customers, employees, suppliers, communities and shareholders.
Shares of U.S. Steel have surged 100.9% in the past year compared with a 32.1% rise of its industry.
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Zacks Rank & Other Key Picks
U.S. Steel currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the Basic Materials space are Axalta Coating Systems Ltd. AXTA, sporting a Zacks Rank #1 (Strong Buy), and Hawkins, Inc HWKN and Alamos Gold Inc. AGI, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
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The Zacks Consensus Estimate for HWKN’s current-year earnings has been revised upward by 1.8% in the past 60 days. HWKN beat the Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 27.5% on average. The stock has rallied around 80.8% in a year.
The consensus estimate for Alamos’ current fiscal year earnings is pegged at 53 cents, indicating a year-over-year surge of 89.3%. AGI beat the Zacks Consensus Estimate in all of the last four quarters, with the average earnings surprise being 25.6%. The company’s shares have surged 43.5% in the past year.
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