David Burritt is the CEO of US Steel and he has a firm stance on the planned $14.9 billion deal with Japan’s Nippon Steel. He expressed confidence in the success of the deal despite the vocal opposition by President Joe Biden, as well as other politicians.
Burritt stated in a recent CNBC “Money Movers” interview that the transaction will enhance national security, stability and jobs for the U.S. Steel industry.
Biden publicly pledged that US Steel would remain American owned, and reports indicate he’s preparing to block the acquisition formally.
The deal has been opposed by both former President Donald Trump and Vice President Kamala Harris.
Burritt responded to these concerns by highlighting Nippon Steel’s longstanding commitment to American operations. The company has been in business in the US since 1950.
Burritt said, “We think the deal closes on merit.” Burritt stated that “Nippon’s investment will enhance US steel production capability and strengthen job security.”
He said that Nippon had pledged to invest $2.7 Billion into US Steel’s struggling steel mills. This, he believed, would save jobs.
Why US Steel cannot invest independently
Burritt, when asked why US Steel couldn’t undertake these investments on its own, explained that the company has to prioritize resources allocation in order to meet shareholder expectations.
Burritt emphasized that it was about the allocation of resources. He noted that Nippon Steel’s size and technological advances give it a competitive edge in research and developments for integrated mills.
He added, “They’re about three times bigger than us and have the best R&D technology and R&D in the industry.”
The Committee on Foreign Investment in the United States is currently reviewing the proposed sale. CFIUS evaluates the implications for national security of transactions that involve foreign entities. Burritt expects CFIUS to make a decision after the November U.S. Presidential election.
CFIUS warned Nippon earlier this month that the sale of steel could result in a decrease in domestic production capacity.
The committee noted potential disruptions of supply chains in sectors critical to national security, such as transportation infrastructure, construction and agriculture.
Burritt dismissed the concerns about national security, stating that Nippon Steel would comply with US Trade laws.
He said that the agreement would be run by US citizens and that the majority of the board members will be Americans. This was to show his confidence that the partnership aligned with US interests.
Burritt, despite the scrutiny that continues to surround the deal, remains confident about the potential benefits it could bring US Steel. He emphasizes the importance of the collaboration with Nippon Steel for the future growth and success of the company in the global market.
Analysts are bullish about US Steel
Wall Street continues to rate US Steel as “overweight”, despite the fact that it will lose over 35% of its value by 2024. The consensus price target is $42, which indicates a potential upside of 40%.
US Steel, despite its disappointing second quarter results, reported a 56% drop in net income to 84 cents a share over the previous year and lowered revenue by 18% to $4.12 Billion. The company outperformed analysts’ expectations which predicted earnings of 72 cents based on revenues of $4.01 Billion.
As new information becomes available, this post US Steel CEO asserts faith in $14.9 billion Nippon Steel sale amid political backlash may be updated.
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