US Steel shareholders have overwhelmingly approved the sale of the company to the Japanese company Nippon Steel for $14.1 billion (€13.2 billion at the current exchange rate). More than 98% of the shares that participated in the extraordinary shareholders meeting held this Friday have given their support to the operation, according to a preliminary count provided by the company through a statement. The company's capital gives full support to an operation to which the President of the United States, Joe Biden, has shown opposition, and which requires administrative authorizations to move forward.
“This transaction will make US Steel and the domestic steel industry stronger and more competitive, enhancing the legacy of steel that is mined, smelted and manufactured in the United States, in the face of unfair competition from China,” said David Burritt, president and CEO of the American company, through a statement, after the vote. That 98% of votes that have participated in the meeting is equivalent to 71% of the total capital in circulation, according to the company.
Japan is a partner that the United States considers reliable, but the operation has been announced in the middle of an election year and the company's plants are located in some of the states that will decide the balance in the presidential elections on November 5. Although US Steel's weight in the US economy is already minimal, its centenary character and past importance endow it with symbolic value. This has caused Biden to use economic, supply chain and national security reasons to show his rejection of the operation.
“It is important to maintain strong American steel companies powered by American workers. “I told our steelworkers I had their backs, and I meant it,” Biden tweeted last month. “US Steel has been an iconic American company for more than a century, and it is vital that it remains domestically owned and operated,” he added, sending the company's stock tumbling.
Market distrust
The company's price closed this Friday at $41.33 per share, far from the $55 per share offered by the Japanese company. That 33% difference in the offer price is a clear sign that investors do not have much confidence that the operation will go ahead, at least in the short and medium term, as a result of political pressures.
This Friday, Burritt celebrated the result of the vote: “The overwhelming support of our shareholders is a clear endorsement that they recognize the compelling justification for our transaction with Nippon Steel. This is an important milestone as we move towards closing the transaction. We are one step closer to bringing together the best of our companies and moving forward together as the 'Best steel manufacturer with world-leading capabilities,' the president of US Steel said in a company statement.
In the note, Burritt assures that the operation is the best alternative for all parties: unionized and non-unionized employees, clients, communities and shareholders, as well as for the United States and Pennsylvania, where the company is based. “By creating the best steel company in the world, we will have a stronger company to maintain our talented employees and fulfill all our commitments to them, including all obligations arising from the current agreements with our unions. We will offer greater capabilities and innovations to our customers in the United States and around the world, and we will be able to invest in greener steel to meet our climate commitments. And we will maintain the US Steel name and the Pittsburgh headquarters, with even more capital to invest in Pennsylvania,” he indicated.
Nippon Steel's offer of $55 per share clearly surpassed the $35 offer made by the American Cleveland-Cliffs, which triggered the company's put up for sale. Cleveland-Cliffs was willing to raise the offer to $40, but the Japanese proposal was much higher.
The operation was unanimously approved by the boards of directors of the two companies. The companies announced that the buyer would honor all of US Steel's commitments to its employees, including all current collective bargaining agreements with its unions.
The operation requires approval from the Committee on Foreign Investment in the United States (CFIUS), dependent on the Treasury Department. He has the power to approve, block or modify the agreement for reasons of national security, or refer it to the president for a decision.
Nippon Steel has committed US Steel to invest an additional $1.4 billion and no layoffs or plant closures until September 2026 under some conditions.
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