Steelmaker U.S. Steel (X) saw its shares surge on Wednesday as confidence in the completion of its $14.1 billion sale to Nippon Steel (JP:5401) increased. This came after Pennsylvania Governor Josh Shapiro met with Nippon Steel Vice President Takahiro Mori on Tuesday to discuss the deal’s impact on U.S. Steel’s Pittsburgh plants and trade unions. Interestingly, investors took the meeting as a positive sign for the transaction, which remains under review by the Committee on Foreign Investment in the U.S. (CFIUS).
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As part of its $14.1 billion bid for U.S. Steel, Nippon Steel has promised not to import steel slabs from its overseas mills into the U.S. or reduce domestic production capabilities. In a letter to United Steelworkers (USW) members at two key U.S. Steel operations, Mori emphasized these commitments while addressing concerns raised by union leaders.
The letter also promised that there would be no layoffs under Nippon Steel’s ownership, which has been the main reason why the unions have opposed the deal to begin with. In addition, he outlined plans to invest approximately $2.7 billion to upgrade U.S. Steel facilities across the United States. Mori noted that these investments are crucial in order to strengthen domestic production and improve operations.
Nippon Working Hard to Close the Deal
It is clear that Nippon Steel really wants to close the deal as it continues to work very hard to overcome the numerous obstacles it has been facing. Indeed, it recently announced that it would sell its 50% holding in a joint venture (JV) to ArcelorMittal (MT) in order to reduce any monopolistic pressures that could be caused by the acquisition.
Is X Stock a Buy or Sell?
Turning to Wall Street, analysts have a Strong Buy consensus rating on X stock based on three Buys, one Hold, and zero Sells assigned in the past three months, as indicated by the graphic below. After an 18% rally in its share price over the past year, the average X price target of $45.25 per share implies 11.78% upside potential.
