US Steel continues to make "progress" toward clearing regulatory scrutiny from the US Department of Justice in its heightened antitrust review of Nippon Steel's bid to acquire the company, bolstered by overwhelming shareholder approval on April 12, the company said in a press release on Thursday May 2.
May 3, 2024
By Robert England
Fastmarkets Metal and Mining
Both Nippon Steel and US Steel reported on Thursday that the deal will now likely close in the second half of the year, compared with earlier estimates it would close in the second or third quarter, representing a potential deadline that could move approval from September to December.
"The company and Nippon Steel Corporation each received, and are working to respond to, a request for additional information and documentary materials from the US Department of Justice in connection with antitrust review," US Steel said in its release.
Meanwhile, US Steel shares have declined, from a peak of $50.20 per share when Nippon Steel made its $14.9 billion, or $55 per share, bid on December 18, to $37.05 per share on May 2, back to the share price level before Nippon Steel made its bid but still well above the $22.57 share price from a year earlier.
"US politicians and [the United Steelworkers union (USW)] already have put it on ice [with US Steel shares] trading more than 30% off its takeout price of $55 per share," Phil Gibbs, equity analyst at Keybanc Capital Markets told Fastmarkets on Friday May 3.
"Only chance it gets done is after the election, so [the three month delay] would make sense logically for them to keep playing the game," GIbbs added.
Steel industry market participants offered a range of views, positive and negative, on the prospects for the deal being successfully approved.
The bid has become embroiled in the politics of a presidential election year, facing intense opposition from both President Joe Biden seeking a second term and former President Donald Trump campaigning for a return to the White House, as well as from some members of Congress and the USW.
Lourenco Goncalves, Cleveland-Cliffs chief executive officer, whose initial effort to acquire US Steel was unsuccessful, told analysts on an earnings conference call April 23 that he expected the Biden Administration to reject Nippon Steel's takeover bid.
A Midwest distributor who supports the takeover said he was torn between the positive assurances from Nippon Steel and US Steel that "there are just a few more details to button up based on initial findings — but it will get done" and worry that the delay could introduce "a lot more risk into the transaction getting closed."
"It does seem to be on rocky footing currently," the Midwest distributor said.
A northeastern distributor was skeptical about the process and the potential outcome.
"The Justice Department is taking its time to give everyone the appearance they are diligently looking at the deal. Whatever decision they make, they can say they fully reviewed all the conditions. But the end result is they will deny the buyout," they said.
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