Japan’s Nippon Steel to acquire U.S. Steel Corp.

Japanese steelmaker Nippon Steel will acquire U.S. Steel Corp. in a $14.9 billion deal, taking advantage of government incentives designed to reshape the U.S. industrial base and boost domestic manufacturing.

Nippon Steel will pay $55 per share in a cash transaction to purchase U.S. Steel and will assume all the company’s debt.

The offer price “represents a 40-percent premium to U. S. Steel’s closing stock price on December 15,” Nippon Steel said in a Monday statement announcing the terms of the acquisition.

U.S. Steel’s stock prices rose 25 percent on news of the deal, jumping from around $40 per share to $50 per share in Monday morning trading, still well below the offer price.

High domestic demand for steel, changes in the structure of the global economy, and new U.S. legislation were all cited by Nippon Steel as factors in the deal.

“Energy and manufacturing industries [will] return to the U.S. under changes in the world economy structure and cheap energy in the U.S. The infrastructure bill and spending is expected to drive steel demand uptick moving forward,” the company wrote in an analysis of the deal.

The Infrastructure Investment and Jobs Act and the Inflation Reduction Act (IRA) — two major pieces of industrial legislation passed under the Biden administration — contained bounties of tax credits.

Tax incentives geared toward revitalizing U.S. industry have already resulted in an investment boom in factory construction. Plant construction spending shot up at the beginning of this year following the passage of the IRA last August.

Nippon Steel is currently the world’s fourth largest producer of steel, behind China’s Baowu Steel Group and Ansteel Group as well as Luxembourg’s ArcelorMittal.

Founded in 1901 by banking magnate J.P. Morgan, U.S. Steel is the 27th largest. It was once the largest company in the world and one of the first companies with a billion-dollar valuation.

According to estimates by the World Steel Association, the combined annual production capacity of Nippon Steel and U.S. Steel would equal 58.56 million metric tonnes, moving it ahead of Ansteel Group to become the world’s third-largest steel producer.

The steel industry is also poised to gain from recent high-profile deals in the auto sector between unions and manufacturers.

The United Auto Workers (UAW) signed new contracts in the fall with three major automakers — Ford, General Motors and Stellantis — securing significant raises and salary guarantees as the auto sector gets overhauled toward electric vehicle production.

“The 150,000 UAW autoworkers at the Big Three have won back major provisions that were sacrificed during the Great Recession, from cost-of-living adjustments (COLA), to annual bonuses for retirees, to the elimination of wage tiers,” the union said in a statement from November.