DEFA14A: U. S. Steel Receives Backing from Proxy Advisory Firms ISS and Glass Lewis for Nippon Steel Deal

Leading proxy advisory firms ISS and Glass Lewis recommend U. S. Steel shareholders vote in favor of the proposed acquisition by Nippon Steel Corporation (NSC).

Summary

• U. S. Steel announced that Institutional Shareholder Services (ISS) and Glass Lewis & Co. have recommended shareholders vote FOR the pending transaction with Nippon Steel Corporation (NSC) at the special meeting on April 12, 2024.
• ISS highlighted the 'meaningful premium' for shareholders and the certainty of an all-cash offer from NSC.
• Glass Lewis noted the deal-implied trailing EBITDA multiple of 6.7x substantially exceeds U. S. Steel's stand-alone valuation.
• The purchase price represents a roughly twelve-year unaffected high for U. S. Steel investors.
• U. S. Steel believes the transaction will advance American priorities through increased financial investment and NSC's advanced technologies.
• U. S. Steel will retain its headquarters in Pittsburgh, Pennsylvania.
• The deal offers shareholders certain and immediate value at a 142% premium compared to the last day of trading before the strategic alternatives process was announced.
• U. S. Steel shareholders of record at the close of business on March 4, 2024, are entitled to vote at the special meeting.
• Innisfree M&A Incorporated is U. S. Steel's proxy solicitor.
• Barclays Capital Inc., Goldman Sachs & Co. LLC, and Evercore are serving as financial advisors to U. S. Steel.
• Milbank LLP and Wachtell, Lipton, Rosen & Katz are acting as legal advisors.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the recommendations from ISS and Glass Lewis, the significant premium offered to shareholders, and the anticipated benefits of the transaction. However, it also acknowledges potential risks and uncertainties, preventing a perfect score.

Positives

• The all-cash offer from NSC provides certainty of value.
• The deal offers a 142% premium to shareholders.
• ISS and Glass Lewis support the transaction.
• U. S. Steel will retain its headquarters in Pittsburgh.
• The sales process was thorough and competitive.
• The deal-implied trailing EBITDA multiple of 6.7x falls between the median and mean trailing EBITDA multiples derived by Barclays in its review of precedent transactions (6.4x and 6.9x, respectively).

Negatives

• The document does not explicitly state any negatives, but it acknowledges potential risks and uncertainties related to the transaction.

Risks

• The ability of the parties to consummate the proposed transaction on a timely basis or at all is a risk.
• The timing, receipt, and terms and conditions of required governmental and regulatory approvals pose a risk.
• The possibility that U. S. Steel's stockholders may not approve the proposed transaction is a risk.
• Disruption of management time from ongoing business operations due to the proposed transaction is a risk.
• The risk that announcements relating to the proposed transaction could have adverse effects on the market price of U. S. Steel's common stock or NSC's common stock or American Depositary Receipts exists.
• The risk of litigation relating to the proposed transaction is present.
• The pending proposed transaction could distract management of the Company.

Future Outlook

The document focuses on the pending transaction and its potential benefits, but also acknowledges risks and uncertainties related to its completion.

Management Comments

• U. S. Steel stated that Nippon Steel will advance American priorities by driving greater quality and competitiveness for customers.
• U. S. Steel stated that the transaction combines two companies with world-leading technologies and manufacturing capabilities to better serve customers.
• U. S. Steel stated that the transaction provides shareholders with the opportunity to realize certain and immediate value.

Industry Context

The steel industry is subject to global economic conditions, trade practices, and competition. This transaction aims to create a stronger, more competitive entity in the global market.

Comparison to Industry Standards

• Glass Lewis noted that the deal-implied trailing EBITDA multiple of 6.7x falls between the median and mean trailing EBITDA multiples derived by Barclays in its review of precedent transactions (6.4x and 6.9x, respectively).
• The document references Cleveland-Cliffs' (CLF) offer, suggesting a competitive landscape in the steel industry.
• The document does not provide specific comparisons to other steel companies beyond the EBITDA multiples.

Stakeholder Impact

• Shareholders are expected to benefit from the premium offered in the transaction.
• Employees are expected to benefit from increased financial investment and advanced technologies.
• Customers are expected to benefit from greater quality and competitiveness.
• The transaction aims to strengthen American supply chains.

Next Steps

• U. S. Steel shareholders will vote on the proposed transaction at the special meeting on April 12, 2024.
• The companies will seek required governmental and regulatory approvals.
• The companies will work to satisfy the conditions to the proposed transaction.

Key Dates

Keywords

Nippon Steel, U. S. Steel, Merger, Acquisition, Shareholders, Proxy Advisory Firms, ISS, Glass Lewis, EBITDA, Premium