Shares of U.S. Steel (X) are trending up 6.9% in pre-market trading at the time of writing, following Nippon Steel’s (NISTF) (JP:5401) sweetened offer to woo the U.S. administration. The news was first reported by Semafor, citing people familiar with the matter. Interestingly, Nippon Steel has agreed to increase its investment to $7 billion, up from $2.7 billion committed earlier, to upgrade U.S. Steel’s factories.
The sweetened offer is an attempt to get the White House’s approval for the long-pending $14.9 billion merger between the two companies. However, the news did not go well with Nippon’s shareholders, who dragged down its shares by nearly 4% on the Tokyo Stock Exchange today.
Nippon Steel’s Persistent Efforts to Buy X
Executives from Nippon Steel are in Washington to meet with administration officials. On Monday, Nippon Steel President Tadashi Imai informed reporters that the company would continue negotiating with the U.S. government to reach a favorable agreement. According to the revised discussions, Nippon Steel will maintain its offer of $55 per share to buy U.S. Steel’s common stock and make immediate capital investments to upgrade the facilities.
Earlier in February, President Donald Trump insisted that Nippon Steel’s bid should take the form of a strategic investment or minority stake, instead of a merger. Nippon Steel’s offer to buy struggling U.S. Steel is based on the premise that it would revamp X’s aging infrastructure and vow to keep its headquarters in Pittsburgh, Pennsylvania. The two companies resumed merger talks with the Trump administration in February this year, following the former administration’s decision to block the deal.
Is U.S. Steel Stock a Buy, Hold, or Sell?
Analysts remain divided on U.S. Steel’s stock trajectory due to uncertainties surrounding Nippon Steel’s investment. On TipRanks, X stock has a Moderate Buy consensus rating based on four Buys and three Hold ratings. Also, the average U.S. Steel price target of $42.17 implies 1.9% downside potential from current levels. Year-to-date, X stock has gained 26.6%.
