Nippon Steel (JP:5401) announced that it would sell its 50% holding in a joint venture (JV) to ArcelorMittal (MT) in a bid to complete its long-pending acquisition of U.S. Steel (X). The Japanese steel manufacturer made the announcement today as part of its efforts to take away the monopolistic pressure from the U.S. Steel buyout. The company said the sale is contingent on the $14 billion U.S. Steel acquisition going through. If the U.S. Steel deal fails to materialize, Nippon will continue to hold the interest in the JV.
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Here’s Why Nippon Steel Wants to Sell JV Interest
Nippon Steel said it would sell its full 50% interest in NS Kote holding company in Calvert, Alabama, to JV partner ArcelorMittal for $1. This would result in Nippon marking a massive consolidated loss of $1.55 billion (230 billion yen).
Nippon Steel’s potential buyout of U.S. Steel has been under intense scrutiny from antitrust regulators due to its anticompetitive nature. Moreover, the U.S. presidential candidates, Kamala Harris and Donald Trump have both opposed the deal and vowed to keep the reins of the American steel maker in American hands.
Meanwhile, the Committee on Foreign Investment in the United States (CFIUS) has extended the date of the review of the potential acquisition until the end of December or the presidential election. Nippon is determined to close the U.S. Steel acquisition by the end of this year and noted that “the share transfer is the most assured path to receiving timely regulatory approval for the acquisition.”
Is U.S. Steel a Good Stock to Buy Now?
Despite the uncertainty surrounding the potential sale of U.S. Steel, analysts remain optimistic about the stock. On TipRanks, X stock has a Strong Buy consensus rating based on three Buys and one Hold rating. The average U.S. Steel price target of $45.25 implies 27.8% upside potential from current levels. Year-to-date, X stock has fallen 27%.
