All companies are involved with mergers and acquisitions, it is a way for a company to grow the solidify their markets and occasionally buy assets for less and add value to shareholders. In every large organization there is a group which reports to the President examining potential companies and most of the time the decision is not to go forth. Once in while, the time is to make a decision.

In an article by River Akira Davis of the New York Times News Service, US Steel Corporation’s Board decided it would accept offers to buy the company out. A number of companies in the steel business examined the assets of the company and one thought it was a lifeline for it. Nippon Steel of Japan saw an opportunity: the home market of Japan demand was anemic, the global business of steel is dominated by China and India, buying US Steel could help Nippon Steel compete better. Nippon Steel agreed to a $14.9 billion, a 40% premium to US Steel’s stock price.

Long time shareholders thought it was wonderful and then the backlash began to happen.

US politicians from both parties condemned the deal because of what it represented. At the start of the 20th Century, US Steel was the most powerful Steel producer in the world. The company was the stuff of legends, but the past 30 years have not been great for the company. However, in a politician belief an American company being acquired by a foreign company was not good.

Over the past year, Nippon Steel has said it would invest over $2 billion into US Steel, but still. The race to become President is dependent on some close races that happen to have US Steel facilities in the area.

The union or the Union Steelworkers did not like the deal. It like a deal with a company US Steel had rejected. Cleveland-Cliffs.

In addition, in every merger or acquisition, a limited number of people are in the decision making process but once a decision is made, it can be made public and outreach to stakeholders is done. When the decision was made public, the President of US Steel David Burritt phoned International Steelworkers President David McCall. After the call, Mr. McCall was taken back because he thought he would be in the loop considering the past offer was rejected.

In every foreign investment, there are different agencies which have to sign off to ensure national security regulations are okay and both sides have made arguments to the agencies.

Part of the issue is Nippon Steel sees Chinese steel as the biggest threat while those against the merger see US Steel as being non-American owned as the biggest threat. After the elections in November we will see the outcome of the merger.

Linking to dividend paying stocks, prior to the announcement of a merger, there needs to be confidential information keeping secret until released to the public which means everyone has the potential to see the information at once. Then decisions can be made, some will accept the higher price and move to alternatives. Some will want to maintain a position but smaller as a wait and see but liking the industry. People act in various manners and partly based on length of holding and how attached you are to the stock. That is all perfectly reasonable and happens all the time. When price is the biggest issue, raising the price is the solution. When many intangibles are in the way, then patience is the solution.

There are more questions than answers, till the next time – to raising questions.