Japan's Nippon Steel to acquire U.S. Steel for $14.9 bln
The acquisition of U.S. Steel will help Nippon, the world's fourth largest steel maker, move toward 100 million tonnes of global crude steel capacity, while significantly expanding its production in the United States, where steel prices are expected to rise as automakers ramp up production following their recent deals with labor unions to end strikes.
Nippon did not give any projection on the value of the synergies that will arise from the deal that justify the price it will pay. It said the synergies will come from pooling advanced production technology and know-how in product development, operations, energy savings and recycling.
Nippon is paying the equivalent of 7.3 times U.S. Steel's 12-month earnings before interest, taxes, depreciation and amortization, LSEG data shows. The median in the steelmaking industry is 7 times, and some analysts said U.S. Steel was worth less given that its $774 million takeover of the Big River steel mill in Arkansas in 2021 has yet to pay off in profitability.
"We feel Nippon is overpaying for those assets. This isn’t the technology space. This is still the cyclical steel industry," said Gordon Johnson, analyst at GLJ Research.