US Steel’s CEO, David Burritt, is standing firm on the company’s planned $14.9 billion sale to Japan’s Nippon Steel, expressing confidence that the deal will ultimately succeed despite vocal opposition from President Joe Biden and other political figures.
In a recent interview on CNBC’s “Money Movers,” Burritt emphasized that the transaction would enhance national security, economic stability, and job retention in the U.S. steel industry.
Biden has publicly vowed that US Steel will remain under American ownership, and reports suggest he is preparing to formally block the acquisition.
Both Vice President Kamala Harris and former President Donald Trump have also voiced their opposition to the deal.
Burritt countered these concerns by highlighting Nippon Steel’s long-standing commitment to American operations, noting that the company has been doing business in the US for 50 years.
“We believe the deal closes on its merits,” Burritt stated. “Nippon’s investment will strengthen job security and enhance US steel production capabilities.”
He pointed out that Nippon has pledged to invest $2.7 billion into US Steel’s struggling mills, a move he believes will save jobs.
Why US Steel could not undertake investments independently
When asked why US Steel could not undertake these investments independently, Burritt explained that the company must prioritize resource allocation to meet shareholder expectations.
“It’s about resource allocation,” Burritt reiterated, noting that Nippon Steel’s size and technological advancements give it an edge in research and development for integrated mills.
“They are about three times our size and have the best R&D and technology in the industry,” he added.
The proposed sale is currently under review by the Committee on Foreign Investment in the United States (CFIUS), which evaluates the national security implications of transactions involving foreign entities. Burritt anticipates a decision from CFIUS after the U.S. presidential election in November.
Earlier this month, CFIUS raised concerns in a letter to Nippon, warning that the sale could lead to a reduction in domestic steel production capacity.
The committee cited potential disruptions in supply chains critical to national security sectors such as transportation, infrastructure, construction, and agriculture.
Burritt dismissed these national security apprehensions, asserting that Nippon Steel will comply with US trade laws.
“This agreement will be managed by US citizens, and the board of directors will primarily consist of American members,” he said, underscoring his confidence in the partnership’s alignment with US interests.
As the deal continues to face scrutiny, Burritt remains optimistic about its potential benefits for US Steel, emphasizing that the collaboration with Nippon Steel is essential for the company’s future success and growth in a competitive global market.
Analysts bullish on US Steel
Despite losing over 35% of its stock value in 2024, Wall Street maintains an “overweight” rating on US Steel, with a consensus price target of $42—indicating a potential 40% upside.
Although US Steel recently posted disappointing second-quarter results—reporting a 56% year-over-year drop in net earnings to 84 cents per share and an 18% decline in revenue to $4.12 billion—the company still outperformed analyst expectations, which forecasted earnings of 72 cents per share on revenue of $4.01 billion.
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