Nippon Steel: May Sell Stake in Joint Venture with ArcelorMittal if Acquires U.S. Steel (X.US)
Nippon Steel Corporation said on Friday that if it successfully acquires United States Steel Corporation (X.US), the company will sell its 50% stake in a joint venture steel mill in Calvert, Alabama, with ArcelorMittal (MT.US).
Nippon Steel stated that after selling NS Kote Holdings, which owns the equity of the joint venture steel mill, to ArcelorMittal for a price of 1 dollar, it will record a consolidated loss of approximately 230 billion yen (about $1.55 billion). However, Nippon Steel also added that if the acquisition of U.S. Steel fails to complete for any reason, the transaction of selling NS Kote to ArcelorMittal will not be completed, and it will not affect the profit performance.
In December last year, Nippon Steel, the world's fourth-largest steelmaker, announced that it would acquire U.S. Steel for $14.9 billion in an all-cash deal, with a purchase price of $55 per share. The financially robust Nippon Steel hopes to expand its footprint in the United States through this acquisition, strengthen its position as a global giant, and use overseas expansion to cope with weak domestic demand. This acquisition is also expected to raise the company's global crude steel production capacity to 100 million tons.
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However, since the announcement, this acquisition plan has encountered repeated setbacks and has provoked strong backlash within the United States. Previously, this acquisition plan was unanimously opposed by U.S. President Biden, Vice President and Democratic presidential candidate Harris, and Republican presidential candidate Trump. They generally oppose foreign ownership of U.S. Steel because the steel produced by the company is an important commodity used to build ships, trains, and infrastructure.
This deal has become a politically "hot potato," with candidates from both parties vying for union votes. Harris, at a rally in the swing state of Pennsylvania, where U.S. Steel's headquarters is located, said she hopes U.S. Steel continues to be "owned and operated by Americans," echoing Biden's views. Trump promised that if elected, he would block the acquisition agreement.
Previously, according to an informed source, the Committee on Foreign Investment in the United States (CFIUS) allowed the two companies to resubmit an application for approval of the transaction when reviewing Nippon Steel's acquisition of U.S. Steel. This means that the decision on this politically sensitive deal will be postponed until after the November 5 U.S. presidential election.
U.S. Steel said at the end of September that the arbitration committee had ruled in favor of Nippon Steel's $14.9 billion acquisition of the company, but the United Steelworkers (USW) union disagreed with this decision. The arbitration committee, chosen jointly by the company and the union, ruled that U.S. Steel had met all the conditions of the inheritance clause in the Basic Labor Agreement (BLA) it signed with the USW. However, the union stated that this decision did not change its opposition to the agreement.
Nippon Steel previously stated that the company would invest billions of dollars in U.S. Steel, "without a doubt," enabling it to "maintain and possibly increase domestic steel production capacity in the United States." Nippon Steel also reiterated that it would not transfer any production capacity or jobs of U.S. Steel outside the United States, nor would it interfere with any decisions of U.S. Steel on trade issues, including decisions to take trade measures against unfair trade practices under U.S. law.