On Monday, May 26, Jefferies analyst Chris LaFemina downgraded his rating on United States Steel Corp. (NYSE:X) to Hold from Buy after President Trump approved a potential partnership between the company and Nippon Steel Corp. (OTC:NPSCY). LaFemina also raised his price target from $50 to $55, the price that Nippon agreed to pay in the event of a complete takeover.
United States Steel’s share price rallied 21% on Friday, May 23, as the market appears to be already factoring in a potential acquisition by Nippon. However, LaFemina believes the agreement’s details remain vague, and he finds it prudent to stay on the sidelines until more specifics are confirmed. He also noted that the deal could take a complex partnership structure, potentially delivering far less value to shareholders than a complete merger. His conservative stance appears justified considering the stock has already approached the offer price, and the upside seems limited.
A steel coil being loaded into a facility for further processing and distribution.
It should be noted that the original deal dates back to December 18, 2023, when Nippon Steel announced its agreement to acquire United States Steel in an all-cash transaction at $55 per share. The offer represented a 40% premium and valued the company at a total enterprise value of $14.9 billion.
At the time, the transaction was expected to be closed by Q3 2024 after necessary approvals. However, the Biden administration blocked it due to national security concerns and labor unions’ pressure.
The deal is now expected to generate at least 70,000 jobs and domestic investment of $14 billion. President Trump is scheduled to visit U.S. Steel’s Pittsburgh plant on May 30, when more deal details could emerge.
United States Steel Corporation is a leading steel manufacturer with operations in the United States of America and Central Europe. It has an annual raw steel production capability of 25.4 million net tons (20.4 million tons in North America and 5.0 million tons in Europe).
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