USS urges shareholders' approval in sale as Nippon woos USW

“Through increased financial investment and NSC’s contribution of advanced technologies, Nippon Steel will advance American priorities by driving greater quality and competitiveness for customers in the critical industries that rely on American steel while strengthening American supply chains,” U.S. Steel said in a statement.

USS’ comments were in response to news the company issued that two independent proxy advisory firms, Institutional Shareholder Services (ISS) and Glass Lewis & Co, also recommended that shareholders vote in favor of the transaction.

In a March 27 report, ISS said, “The sales process was thorough, shareholders are receiving a sizable premium, there is a potential downside risk of non-approval, and there is certainty of value in NSC’s cash offer.”

Recall that Nippon agreed to pay nearly $15 billion for USS – approximately $14.1 billion in cash plus the assumption of debt for a total enterprise value of $14.9 billion.

For USS shareholders, this means they will receive $55 per share upon completion of the sale. This is a significant premium to the $39.72/share closing USS stock price on Dec. 15, 2023 – the last business day before the acquisition was announced. At the opening of this week, USS stock was trading at $41.02/share.

Glass Lewis noted in its own March 27 report that “… in absolute terms, the proposed purchase price represents a roughly twelve-year unaffected high for USS investors.”

Nippon makes formal commitment to USW

The United Steelworkers (USW) union has not been supportive of Nippon as the buyer of U.S. Steel despite NSC’s attempts to woo the union.

According to an April 1 Bloomberg article, NSC recently made a formal, written commitment to USW, putting into writing previous pledges by the company.

The formal commitment “includes an additional $1.4 billion in capital spending, as well as ‘no layoffs as a result of this transaction and no layoffs through at least the term’ of the existing labor agreement, which expires in 2026,” Bloomberg said.

NSC also reportedly sent a letter to two US senators in Pennsylvania who have publicly opposed Nippon’s takeover of U.S. Steel. The Bloomberg article says the letter includes “a commitment not to shut down or idle facilities covered by the labor deal at least until it expires; a commitment to share “leading-end technology” at the sites; a commitment to “revisit” plans for three blast furnaces; a commitment to share audit of financial statements; and “a commitment that U.S. Steel jobs and production will remain in the United States.”

USW responded coldly to NSC’s letter, saying it was leaked by Nippon “portraying it as an earnest effort to address our concerns. In truth, it was another meaningless piece of paper,” according to an April 2 update to members.

USW International President David McCall sent an unfriendly email response to Takahiro Mori, NSC’s representative director and EVP on Tuesday. In it, he slammed Mori for ignoring a March 11 letter from McCall that spelled out specific actions NSC would have to take to assume the USW agreements.

Additionally, McCall’s letter calls out various legal terminology which the union believes is setting up “layers of protection for NSC” to protect it from potential future litigation in US courts concerning NSC’s labor obligations.

“For every commitment that the Nippon parties purport to make, the March 27 proposal envisions a way to release the Nippon parties from these pledges,” McCall’s letter states.

He then says the union and Nippon can meet in the coming weeks to discuss the transaction. “Please understand, however, that Nippon’s March 27, 2024, proposal does not provide a meaningful basis for a resolution of the ongoing dispute,” he finishes.

At the time of this story’s publication, NSC had not responded to a request for comment. Note that Nippon and USW previously signed a non-disclosure agreement (NDA).