NPSCY - US Steel Merger Faces Bipartisan Political Backlash

2024-03-13 02:51:18 ET

Summary

• Nippon Steel has agreed to buy US Steel for $55 per share, offering significant upside potential and downside risk.
• The Biden administration's antitrust focus has led to increased media attention on merger failures, which has impacted the deal's success, with Trump pledging to block the deal if he wins.
• US Steel's weak financial position and declining steel demand may make a merger necessary for its profitability, but political and labor concerns may hinder the deal.
• X is trading near the midpoint of its acquisition price target and its pre-deal range, a fair price given the reasonable uncertainty surrounding the deal.
• Should the Nippon deal fail, I would not necessarily bet Cleveland-Cliffs will bid as high as Nippon and may step away due to the FTC's strong antitrust focus today.

Over recent months, significant investor interest has been in the merger between US Steel ( X ) and Japanese Nippon Steel ( NPSCY ). Nippon has agreed to buy X for $55 per share, about 17% above its current price. Before the acquisition announcement, X was trading for about $36, or about 24% below its current price. As such, X faces both considerable upside potential and downside risk regarding the success of the merger deal. Realistically, the potential loss of a deal failure may be more significant as X began merger talks in August , doubling in value since then....

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