Elmwood CLO resets $517.25M deal via SMBC Nikko.

Elmwood CLO resets $517.25M deal via SMBC Nikko.

In a significant development for the global steel industry, Nippon Steel has secured White House approval for its acquisition of U.S. Steel. The approval, granted late last week, comes with several conditions aimed at ensuring the deal benefits both parties and the U.S. economy.

The deal, which has been in the works for 18 months, received a green light from President Donald Trump, subject to several key concessions. Nippon Steel has agreed to invest $11 billion in U.S. Steel and grant the U.S. government a "golden share," allowing it to have a say in major decisions. Additionally, the Japanese steelmaker plans to appoint eight out of U.S. Steel's nine board members, with two being U.S. citizens, and key management positions will be held by Americans. To manage its debt-to-equity ratio, Nippon Steel will utilize a $3.4 billion hybrid loan [1].

Analysts have expressed mixed reactions to the deal. While some are optimistic about the potential for growth in the new market, others have raised concerns about the dilutive effect of the equity issued to fund the acquisition. The stock of Nippon Steel has been volatile, rising as much as 5.1% on Thursday before closing up just under 2.3% after two days in the red. Analysts at SMBC Nikko Securities Inc. caution that uncertainty over capital raising and the time it takes for investment benefits to materialize may weigh on the share price in the near term [1].

Nippon Steel's executives have defended the deal, arguing that the mitigation measures demanded by the White House will not hinder the company's ability to turn U.S. Steel around. CEO Eiji Hashimoto emphasized that the agreement ensures both managerial flexibility and profitability, essential for business investment. The acquisition is seen as a strategic move to expand Nippon Steel's global footprint and diversify away from shrinking demand in its home market, as well as to compete with low-cost Chinese exports [1].

The Japanese government has welcomed the tie-up, noting that it will contribute to a better investment environment and strengthen ties between Washington and Tokyo.

References:
[1] https://www.crainscleveland.com/manufacturing/nippon-steel-could-issue-equity-fund-us-steel-deal