The stock of U.S. Steel (X) is up 5% after U.S. President Donald Trump approved its takeover by Japan’s Nippon Steel (NISTF).
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Trump issued an executive order on June 13 after markets closed that allows U.S. Steel and Nippon to finalize the acquisition once they sign a national security agreement with America’s federal government. U.S. Steel said that the national security agreement includes a golden share for the U.S government, without specifying what powers the government would wield over the newly combined steelmaker.
Trump said the golden share gives him “total control” of the combined U.S. Steel and Nippon company without providing any details. Some media reports claim that the U.S. government will have several seats on the new company’s board of directors.
U.S. Oversight
Reportedly, the U.S. president will also have veto power over any decision to relocate U.S. Steel’s headquarters, move the company outside the U.S., rename U.S. Steel, transfer production or jobs outside the U.S., and close or idle plants within a set period of time.
Trump has avoided calling the U.S. Steel-Nippon transaction a “takeover” or even a “merger.” Instead, he is referring to the deal as a “partnership.” U.S. Steel has confirmed that it will become a wholly owned subsidiary of Nippon Steel North America once the deal is completed later this year.
X stock has gained 62% this year on expectations related to its takeover. Japan’s Nippon is paying $14.9 billion for U.S. Steel.
Is X Stock a Buy?
The stock of U.S. Steel has a consensus Hold rating among six Wall Street analysts. That rating is based on five Hold and one Sell recommendations issued in the last three months. The average X price target of $49.25 implies 10.24% downside from current levels.
