Steel stocks for U.S. companies are rising today after U.S. Steel (NYSE:X) announced that it will be bought by Nippon Steel (OTCMKTS:NPSCY). Shares in the iconic American steelmaker are jumping more than 25% on the news. Meanwhile, NPSCY stock is down about 4% today. Nippon will pay $55 per share in cash, representing a roughly 40% premium to U.S. Steel’s closing price on Dec. 15.
U.S. Steel opened today, Dec. 18, at $49.77 per share and a market capitalization of around $11 billion. The difference between the price being paid and the market price is due to the expected delay in getting the deal approved by regulators.
Steel Stocks: Closing on American Steel
Shares in other U.S. steelmakers are also jumping on the news. Cleveland-Cliffs (NYSE:CLF), which proposed buying U.S. Steel back in August, is climbing over 9% today. Likewise, Steel Dynamics (NASDAQ:STLD) is up roughly 1% as of this writing while Nucor (NYSE:NUE) — which is now the largest U.S. steelmaker — is up 2%.
What’s more, Steel Dynamics was the “stock of the day” at Investor’s Business Daily on Dec. 15 as steel prices rose. Nucor is raising its dividend as well, despite warning of weaker fourth-quarter earnings.
U.S. Steel put itself up for sale back in August after rejecting Cleveland-Cliffs’ cash and stock offer. Cleveland-Cliffs, which has an average moderate buy rating from analysts, recently raised its price for hot-rolled steel to $900 per net ton.
U.S. Steel was formed back in 1901 via a merger between J.P. Morgan’s Federal Steel and Carnegie Steel. The deal was worth $1 billion and made Andrew Carnegie the world’s richest man, per CNN. However, the combined company’s output peaked in the 1970s. Employment last year was “just under 15,000 US employees.”
Meanwhile, Japan-based Nippon Steel is the world’s fourth-largest steelmaker by volume. The company sits behind two Chinese companies and ArcelorMittel (NYSE:MT), which is controlled by an India-based company.
What Happens Next?
Despite U.S. Steel’s iconic name and history, the deal between the company and Nippon Steel will likely be approved, given U.S. Steel’s current size.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guideline.
