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Nippon Steel to Divest Stake in Alabama Plant Amid U.S. Steel Acquisition Plans

By  |  October 16, 2024

Nippon Steel, the world’s fourth-largest steelmaker, announced on Friday (Oct 11) that it intends to sell its entire 50% stake in a joint venture steel plant in Calvert, Alabama, shared with ArcelorMittal. The move is contingent upon the Japanese company successfully acquiring U.S. Steel, a deal that has sparked political opposition and is currently under review by U.S. regulatory authorities. According to Eastern Eye, this divestment aims to address antitrust concerns and expedite the approval process for the U.S. Steel acquisition.

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    The potential acquisition of U.S. Steel has faced resistance from both sides of the American political spectrum. U.S. Vice President and Democratic presidential candidate Kamala Harris, alongside her Republican rival Donald Trump, have voiced support for maintaining U.S. Steel as an American-owned entity. With the deal signed last December, the Committee on Foreign Investment in the United States (CFIUS) has extended its review until after the upcoming presidential election in November. Per Eastern Eye, Nippon Steel has resubmitted its application to CFIUS in hopes of obtaining a decision by December.

    In a statement last Friday, Nippon Steel confirmed that its decision to sell the stake in the Alabama joint venture was made to “proactively address any antitrust concerns” that might arise from the U.S. Steel acquisition. Shigekazu Iwamoto, Nippon Steel’s managing executive officer, stated that selling the stake is “the most assured path” to securing regulatory approval in a timely manner. Despite the divestment, Iwamoto emphasized that the company’s goal to close the U.S. Steel acquisition by the end of the year remains unchanged.

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    Related: Pennsylvania Governor Opposes Nippon Steel’s Bid for U.S. Steel, Citing Union Concerns

    The 4.7 million metric ton Calvert plant, which primarily produces steel sheets for the automotive industry, has been a profitable venture. However, Nippon Steel said it would prioritize the acquisition of U.S. Steel, which has a significantly larger production capacity. “We are prioritizing the acquisition of U.S. Steel, which surpasses Calvert in production scale, to strengthen our North American business,” Iwamoto explained, noting that U.S. Steel’s annual crude steel output capacity is nearly 16 million tons, far exceeding that of Calvert.

    In terms of financial impact, Nippon Steel expects to book a consolidated loss of approximately 230 billion yen (£1.18 billion) from the sale of its stake to ArcelorMittal for a symbolic $1 (£0.76), according to the company. The company did not provide further details on the specifics of the deal.

    However, if the U.S. Steel acquisition does not proceed, Nippon Steel clarified that the sale of its Alabama stake “will not be consummated and there will be no impact on earnings.” Additionally, Iwamoto reassured investors that the divestment in Alabama would not affect Nippon Steel’s joint venture with ArcelorMittal in India, nor would it alter the company’s long-term strategic objectives in that market.

    As Nippon Steel moves forward with its U.S. Steel buyout plan, the focus will now be on navigating the regulatory landscape and addressing concerns from both American politicians and market regulators.

    Source: Eastern Eye