NIPPON Steel slumped the most in four months after a closely watched summit between US President Donald Trump and Japanese Prime Minster Shigeru Ishiba heightened uncertainty over the company’s plan to acquire United States Steel.
The leaders said Nippon Steel may make a significant investment in the US steelmaker instead, surprising investors. Shares in the Japanese firm fell as much as 2.6 per cent in Tokyo on Monday (Feb 10), the biggest intraday drop since Sep 30, before recovering slightly.
An investment would be a significant shift away from the originally planned buyout. Nippon Steel and US Steel first announced the US$14.1 billion acquisition in December 2023, and spent the past year working to clear a series of regulatory and political hurdles. Former president Joe Biden eventually blocked the takeover in January, citing national security issues. Supporters of the deal claimed the decision was politically motivated.
It was unclear what Trump and Ishiba meant by an investment as neither offered details of what a deal would look like without an outright purchase. The companies have yet to comment on any potential investment.
“There’s not a lot of material for the market to determine the outlook of this US Steel deal,” said Ryunosuke Shibata, an analyst at SBI Securities. “It seems that a complete takeover wo not materialise, meaning Nippon Steel may not pay up to two trillion yen for the deal. The president also said it would be an investment, but there’s no clarity of what that structure might look like.”
The sell-off may indicate that investors are taking profits after Nippon Steel shares surged on Friday on positive earnings. A complete takeover would be a better option than an investment for Nippon Steel because the company would be able to transfer its technologies and resources to US Steel, he said.
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Nippon Steel executives had been optimistic ahead of the summit that Trump would override his predecessor, but he reiterated last week he has no interest in doing so. He said he may meet with the head of the Japanese company this week.
“I don’t want US Steel being owned by a foreign country,” Trump told reporters on Sunday. Nippon Steel cannot own a majority share in the iconic American company, he said. “All they can have is an investment.”
Investors will need more information, especially how any investment in the US company may impact Nippon Steel’s earnings, and whether the Japanese company would be on the hook for any payments to terminate the deal, SMBC Nikko Securities analysts Atsushi Yamaguchi and Takuya Maeda said in a research note on Monday.
Still, considering the deal is on hold now, the two leaders’ statements at the Friday summit “may be a step forward”, the analysts said in the note. BLOOMBERG
