Consolidation continues in the manufacturing sector, with Japan’s largest steel-maker Nippon Steel acquiring rival US Steel for $14.9 billion.
After months of negotiations, the Tokyo-based company managed to secure an all-cash deal that values the historic US manufacturer at $55 a share.
The offer features a premium of over 140% compared to the one launched in August last year by US Steel’s domestic competitor Cleveland-Cliffs, whose $35-per-share offer, in cash-and-stock, was promptly rejected.
Since then, the famed American steel producer received declarations of interest by both multinational corporation ArcelorMittal, and the largest US steel-maker Nucor.
Nippon’s offer proved to be the most appealing, both for the financial return and the synergies, such as the matching expertise in manufacturing operations.
The acquisition, predicted to close in summer this year, signals the end of an era for century-old US Steel, founded in 1901 by tycoons Andrew Carnegie, J.P. Morgan and Charles Schwab.
The company quickly rose to be the largest in the world and became a symbol of American power across the globe. It reached the height of its fame and capacity around mid-century, with 340,000 employees and 36 million tons of steel produced.
In the following decades, with the emergence of cheap manufacturing labor worldwide, the decline began. With it, the US supremacy in the sector also started to fade.
Today, the US ranks fourth in the world as a steel producer, after China, India and Japan. Beijing is the undisputed leader, accounting for 54% of global steel output.
This merger represents a victory for Japan, which could now strengthen its position and better respond to the growing global demand for steel.
However, fierce opposition could complicate matters: US Steel unions are resisting the sale of a piece of American history to a foreign-owned company. Congressmen have also vowed to stop the transaction.
Nippon Steel, which has been present in the US for 40 years, pledged that all union demands will be honored. It also confirmed that US Steel will retain its historic name and headquarters in Pittsburgh. Yet, doubts remain, and the fight to keep a jewel in America’s crown on its native soil has only just begun.
