At the beginning of the week there were significant price swings in stocks from the steel sector. The background: the largest Japanese steel company Nippon Steel wants to swallow its US rival US Steel for 14.1 billion dollars.

Accordingly, the US Steel stock reacted positively, closing with a gain of 26% after the announcement of the takeover offer on Monday. This means that the papers have almost doubled in the stock market year 2023.

United States Steel: Traditionsfirma par excellence United States Steel is a company based in Pittsburgh, Pennsylvania and has been one of the world’s largest steel producers for over 100 years. The company was founded in 1901 by businessman Andrew Carnegie, who aimed to dominate the American steel industry.

The current business model of U.S. Steel includes the production, processing and distribution of steel products for various industries, including automotive, construction, energy and transportation. The company is active throughout the steel production value chain, from ore extraction to the production of raw steel to the production of high-quality steel products. U.S. Steel operates several production sites and relies on technologies and innovations to offer competitive steel solutions and position itself in a global market.

Nippon Steel pays a 40% premium Now the Japanese steel maker Nippon Steel is after the US rival. Nippon Steel is offering $55 per share to take over the rival completely and make it a 100% subsidiary. This values the US steelmaker at around 14.1 billion dollars. Including debt, the company is valued at 14.9 billion dollars. Compared to the closing price of the trading day before the takeover, the offer corresponds to a premium of 40%.

Thus Nippon Steel has prevailed. In August, Nippon Steel had rejected a takeover offer from Cleveland-Cliffs.

Takeover creates world’s third-largest steel producer The consolidation in the steel market is therefore unstoppable. The intention of the takeover is obvious: Nippon Steel wants to expand in the USA and become the world’s third-largest steel producer with the purchase.

According to the World Steel Association, Nippon Steel produced 44.4 million tons of crude steel in 2022, placing it fourth in the world. The object of desire, US Steel, ranked 27th behind US producers Nucor and Cleveland-Cliffs. With the takeover, Nippon Steel will replace China’s Ansteel Group as the world’s third largest steelmaker, with only Baowu Steel Group and ArcelorMittal being larger.

Position in the USA significantly strengthened The takeover should also help Nippon Steel to double its global capacity to 100 million tons of crude steel. The USA is to be the focus, while demand for steel products in the domestic market is declining.

The boards of both companies have reportedly already agreed to the merger. What is now required is the approval of US Steel’s shareholders. The takeover is expected to be completed in the second half of next year.

Meanwhile, the stock price of US Steel was trading at 48.54 dollars yesterday afternoon, still a good distance from the takeover price (55 dollars).