Investing

US Steel Going to Japan; EV Maker Nio Gets Boost from Abu Dhabi

Paul Ausick

Published: December 18, 2023 9:30 am

Two big deals were announced before markets opened on Monday. A Japanese steelmaker is buying an iconic U.S. steelmaker, and a Middle Eastern oil supplier is buying a big piece of an electric vehicle (EV) maker.

U.S. Steel accepts $55 per share buyout

Source: Tom Mihalek / Getty Images

Japan’s Nippon Steel Corp. has signed a definitive agreement to acquire U.S. Steel Corp. (NYSE: X) in an all-cash deal valued at $14.1 billion. Including debt, U.S. Steel’s enterprise value is $14.9 billion at Friday’s closing price of $39.33 per share.

Nippon Steel will pay $55 per share for U.S. Steel, a premium of 40% to Friday’s closing price. According to Nippon Steel’s press release, the transaction is expected to close in the second or third quarter of 2024. The acquisition is being funded by borrowing from some Japanese banks, and there are no financing conditions on the deal.

The deal brings to an end a story that hit the wires in August. Cleveland-Cliffs Inc. (NYSE: CLF) offered to buy the steelmaker for $35 a share when U.S. Steel’s stock was trading at around $22. U.S. Steel rejected the offer (a 42% premium) as “unreasonable.”

As we noted in August, the jewel in the crown was U.S. Steel’s mini mill in Big River, Arkansas. The company paid a total of about $1.5 billion to acquire Big River in 2019 and 2021, the only LEED-certified flat-rolled steel mill in North America. Big River’s mill produces 65% less carbon dioxide emissions than a typical integrated steel mill. The mill produces 3.3 million metric tons of steel annually in its electric arc furnaces.

In its announcement, Nippon Steel listed the Big River mill first among a number of strategic benefits from the acquisition. The Japanese firm also noted that it will honor all of U.S. Steel’s collective bargaining agreements.

What about U.S. Steel’s unions?

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When Cleveland-Cliffs made its purchase offer in August, the United Steel Workers union issued a letter noting the USW’s “right to counter any proposal to acquire a controlling interest in USS or its facilities covered by the USW agreement.” The union also said that it “will not endorse anyone other than Cliffs for such a transaction.” Perhaps such an endorsement is in the works for Nippon Steel, but it’s not in place yet. Or, perhaps the union is preparing a counteroffer?

U.S. Steel stock traded up nearly 30% in Monday’s premarket session at around $50.60, a new 52-week high if it holds until the opening bell. The stock posted a new 52-week high of $39.72 on Friday.

EV maker Nio gets $2.2 billion investment

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Shanghai-based Nio Inc. (NYSE: NIO) has entered into a share subscription agreement with CYVN Holdings LLC, an investment vehicle of Abu Dhabi. CYVN will invest a total of $2.2 billion in 294 million newly issued Nio shares at $7.50 per share.

In July, CVYN invested $738.5 million in Nio and later acquired $350 million in shares held by Tencent Holdings Limited. Once the new deal is completed, CYVN will own approximately 20.1% of Nio’s issued and outstanding stock. CYVN is also entitled to nominate two directors to Nio’s board.

Like many other EV makers, Nio has struggled this year. Deliveries of battery electric vehicles have slipped this year, and automakers like General Motors Co. (NYSE: GM), Ford Motor Co. (NYSE: F), and Volkswagen have delayed aggressive plans to ramp up EV production and introduce new models over the next few years.

Nio’s stock traded up about 9% in Monday’s premarket session at $8.70. The stock’s 52-week range is $7.00 to $16.18.