Shares in U.S. Steel (X) strengthened nearly 5% in pre-market trading after one of its investors said its $15 billion sale to Japanese peer Nippon Steel was “dead”.
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Trump Opposition Weakens Deal
In a letter to U.S. Steel board members Ancora Holdings, a diversified investment firm that oversees approximately $10 billion in assets, declared that President Trump’s opposition to the sale means that the deal should be scrapped and that U.S. Steel should take the $565 million breakup fee. This is the amount Nippon will have to pay U.S. Steel if the deal fails to go through.
The letter comes after Trump’s announcement at the end of last week that Nippon had abandoned plans to buy U.S. Steel but would instead “invest heavily” in it. He added that he remained opposed to a takeover. It also comes as Trump threatens to impose a 25% tariffs on imports of steel to the US. “The sale has no chance of being resurrected,” the Ancora letter stated. “We applaud President Trump’s steadfast commitments to protecting U.S. Steel and reviving America’s industrial and manufacturing industries. U.S. Steel now must decide if it stands with shareholders.”
Turnaround Plan Proposed for U.S. Steel
Ancora also used its letter to urge U.S. Steel to finally engage with it declaring that its director nominees and chief executive candidate Alan Kestenbaum are ready to execute a turnaround plan. This includes a multibillion-dollar capital investment program focused on reinvigorating the legacy blast furnaces at Mon Valley and Gary Works while using the proceeds from the breakup fee to offset upfront capital needs. It said that it was time for U.S. Steel to get back to business and focus on leveraging President Trump’s pending tariffs as a tailwind for a turnaround.
Is X a Good Stock to Buy?
On TipRanks, X has a Moderate Buy consensus based on 3 Buy and 3 Hold ratings. Its highest target price is $40. X stock’s consensus price target is $39.80 implying an 7.63% upside.
