Japan’s Nippon Steel clinched a deal on Monday to buy US Steel for $14.9 billion in cash, prevailing in an auction for the 122-year-old iconic steel maker over rivals including Cleveland-Cliffs and ArcelorMittal.

The deal price of $55 per share represents a 142 per cent premium to August 11, the last trading day before Cleveland-Cliffs unveiled a $35-per-share cash-and-stock bid for US Steel.

Cleveland-Cliffs’ move prompted US Steel to launch a sale process. In a meeting of its board of directors on Sunday, US Steel deemed Nippon’s offer superior to a sale to Cleveland-Cliffs, which had raised its bid in the high $40-per-share range, the sources said.

The outcome is also a blow for ArcelorMittal, which Reuters has reported also pursued US Steel.

Nippon and ArcelorMittal own a plant in Alabama that produces steel sheet products by processing semi-finished products, or slabs, procured from local and overseas suppliers. They are also investing about $1 billion in an electric arc furnace.

The deal will help Nippon, the world’s fourth largest steel maker, move toward 100 million tonnes of global crude steel capacity, while significantly expanding its production in the United States, where steel prices are expected to rise as auto makers ramp up production following their recent deals with labour unions to end strikes.

Nippon did not give any projections of the synergies that will arise from the
deal that justify the price it will pay. It said the synergies will come from pooling advanced production technology and know-how in product development, operations, energy savings and recycling.

“We feel Nippon is overpaying for those assets. This isn’t the technology space. This is still the cyclical steel industry,” said Gordon Johnson, analyst at GLJ Research.