Nippon Steel shares rise after Trump approves US$14.9B steel bid

An employee enters Nippon Steel's plant in Kashima, Japan. (Ayaka McGill / AP Photo)

TOKYO — Nippon Steel shares rose on Monday after U.S. President Donald Trump approved its US$14.9 billion bid for U.S. Steel X.N, clearing a key hurdle in its 18-month pursuit and securing access to a vital market for its growth strategy.

The approval capped a tumultuous process marked by union resistance and two national security reviews.

Shares of Nippon, the world’s fourth-largest steelmaker, gained three per cent to 2,915 yen by the mid-day break after being untraded with a glut of buy orders earlier in the day. They outperformed Tokyo’s benchmark Nikkei 225 index which was up about one per cent.

On Friday, Trump signed an executive order allowing the tie-up to proceed, contingent on an agreement with the Treasury Department addressing national security concerns. The companies then announced they had signed the agreement, effectively clearing the deal.

The agreement includes $11 billion in new investments by 2028, along with commitments on governance, production and trade. Nippon Steel also confirmed plans to acquire 100 per cent of U.S. Steel’s ordinary shares.

“Investors have welcomed the resolution of uncertainty surrounding the deal,” said Shinichiro Ozaki, senior analyst at Daiwa Securities.

“Overall, the agreement appears relatively reasonable in both investment size and timeframe,” he said, noting the acquisition is central to Nippon Steel’s medium- to long-term growth strategy.

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The deal would boost Nippon Steel’s annual production capacity to 86 million metric tons from 63 million tons.

“Shares rose on long-term growth expectations, driven by preferential access to the U.S. market, where steel demand is expected to increase,” said Masayuki Kubota, chief strategist at Rakuten Securities.

Still, some investors remain concerned about near-term financial strain from the sizable investments. Also, the U.S. government’s ownership in the combined company, known as the “golden share,” has raised questions of the degree of control it can exert.

“While the risk of a capital increase hasn’t completely receded, it may be less severe than expected,” Ozaki said, referring to Trump’s earlier comment that the steelmaker plans to invest $14 billion in the next 14 months.

Ozaki downplayed management risk linked to the golden share, saying “Nippon Steel anticipates growth in the U.S. market for high-end products, making production cuts and job reductions unlikely.”

(Reporting by Yuka Obayashi and Noriyuki Hirata; Editing by Christian Schmollinger)