U.S. Steel’s (X) CEO, David Burritt, warned that the steelmaker may be forced to close its plants and move out of its headquarters in Pittsburgh if Nippon Steel’s (JP:5401) $14 billion takeover of the company collapses. Burritt talked about this in an exclusive interview with the Wall Street Journal on Wednesday,
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Burritt explained that Nippon Steel’s takeover is essential for the company to remain competitive and preserve workers’ jobs. Since the deal was announced in December, it has faced growing criticism from U.S. politicians and the United Steelworkers union.
Presidential Candidate Harris Opposes the Deal
In response to the deal, Democratic presidential candidate Kamala Harris has argued that U.S. Steel should remain under American control. Similarly, Republican nominee Donald Trump has stated that he would seek to block the transaction if elected.
Both U.S. Steel and Nippon Steel have attempted to address concerns about the deal, highlighting its potential benefits. Earlier on Wednesday, Nippon Steel assured that, if the acquisition proceeds, U.S. Steel’s core senior management and the majority of its board members would be American citizens.
U.S. Steel’s Plans
Burritt also mentioned that if the planned takeover of the company collapses, it could shift its production to less capital-intensive operations, such as the Arkansas mill. Burritt referred to producing steel at the Arkansas mill as a less capital-intensive process because this mill produces steel from melting scrap. Usually, both Nippon Steel and U.S. Steel primarily produce steel from melted iron ore.
It is important here to note that U.S. Steel had canceled an upgrade to its Pittsburgh plant in 2021 while acquiring a new steel mill in Arkansas.
While the deal has already received all necessary regulatory approvals outside the U.S. and approval from U.S. Steel’s shareholders, it is currently undergoing regulatory review in the United States.
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 26% year-to-date decline, the average X price target of $45.25 per share implies a 27.11% upside potential.
