U.S. Steel Shareholders Clear Transaction with Nippon Steel

United States Steel Corporation X said that its shareholders have approved its proposed merger with Nippon Steel Corporation ("NSC"), marking a key milestone toward the completion of the transaction.
More than 98% of the shares voted at the special meeting of stockholders held on Apr 12, 2024 were voted in favor of the proposal to adopt the merger agreement, based on the preliminary vote count.
U.S. Steel stated that the overwhelming support from its shareholders is a clear recognition of the compelling rationale for the deal. The transaction will strengthen U.S. Steel and the domestic steel industry and enhance the legacy of steel that is made in America in the wake of unfair competition from China, X noted.
U.S. Steel and NSC officially entered into a definitive agreement in December 2023, under which, NSC agreed to acquire U.S. Steel in an all-cash deal at $55 per share. The transaction is valued at roughly $14.1 billion-plus assumed debt, equating to a total enterprise value of $14.9 billion. The purchase price of $55 per share represents a substantial 40% premium over U.S. Steel's closing stock price as of Dec 15, 2023.
NSC noted that the strategic move to acquire U.S. Steel is aimed at augmenting its global manufacturing and technology capabilities. The acquisition will facilitate an expansion of NSC's geographical reach, allowing it to better serve stakeholders, including customers and society at large. This strategic expansion will notably increase NSC's production in the United States, complementing its existing strongholds in Japan, ASEAN and India.
With the acquisition, NSC's total annual crude steel capacity is expected to reach 86 million tons, aligning with its strategic objective of achieving 100 million tons of global crude steel capacity annually. NSC also underscored the synergies arising from the transaction, emphasizing the amalgamation of cutting-edge technologies and manufacturing capabilities.
However, the deal has drawn significant opposition from the Biden administration on concerns about the implications on U.S. national security, supply chains and steel jobs. President Joe Biden, last month, said that U.S. Steel should remain American owned and operated. The U.S. Department of Justice has reportedly launched an extended antitrust investigation into the proposed merger. The United Steelworkers union has also expressed concerns of potential job losses from the transaction.
U.S. Steel's shares have rallied 57.4% over the past year, outperforming the 11.3% rise of its industry.

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Zacks Rank & Key Picks

U.S. Steel currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks worth a look in the basic materials space include Denison Mines Corp. DNN, Carpenter Technology Corporation CRS and Innospec Inc. IOSP.
Denison Mines beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 300%. The company's shares have soared roughly 105% in the past year. DNN carries a Zacks Rank #1 (Strong Buy).
The Zacks Consensus Estimate for Carpenter Technology's current fiscal year earnings is pegged at $3.96, indicating a year-over-year surge of 247.4%. CRS beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 12.2%. The company's shares have rallied around 68% in the past year. CRS currently carries a Zacks Rank #2 (Buy).
The consensus estimate for Innospec's current-year earnings is pegged at $6.72 per share, indicating a 10.3% year-over-year rise. IOSP, carrying a Zacks Rank #2, beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 10.5%. The company's shares have gained around 14% in the past year.

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