The U.S. Steel (X) acquisition proposal by Nippon Steel (JP:5401) has proven a hot-button issue. And now, in a move that suggests a certain division in the Democrats’ ranks, none other than Vice-Presidential candidate Tim Walz has come out in favor of it. This schism, coupled with some new investment plans, sent U.S. Steel up nearly 2.5% in the closing minutes of Thursday’s session.
While current President Joe Biden is against the deal, along with former President Donald Trump, Vice President Kamala Harris has not yet articulated her position on the U.S. Steel deal. But Tim Walz may have just done the job for her, coming out in its favor…well before the other candidates.
Walz reportedly met with Takahiro Mori, Nippon Steel’s vice chairman and lead negotiator for the U.S. Steel deal, back in June. Walz was, as Mori noted, “very positive” about Nippon Steel’s plans to invest. In fact, Mori noted that “…if it wasn’t an election year, this deal would have closed long ago.”
Nippon Steel Is Planning to Spend Big
The deal will not simply be just a matter of taking over, producing material, and reaping the rewards therein. No, reports note that Nippon Steel is planning to spend big to bring U.S. Steel up to snuff. It plans to put $2.7 billion into the operation through 2026 if it is actually allowed to buy the company.
Of that, at least $1 billion will go to the West Mifflin hot strip mill as well as some other facilities. The upgrades will improve the yield of the plants, as well as the overall product quality. There will even be a nod to green concerns, as energy efficiency will get a boost. Another $300 million would go to the Gary Works plant, located in Indiana. Meanwhile, the company’s headquarters is set to stay in Pittsburgh.
Is U.S. Steel Stock a Good Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on X stock based on three Buys and one Hold assigned in the past three months, as indicated by the graphic below. After a 24.96% rally in its share price over the past year, the average X price target of $45.25 per share implies 17.35% upside potential.
