Nippon Steel investors begin to count cost of $18b US Steel purchase

Besides paying a 142% price premium, they must raise funds for promised investments

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After a year and a half of government talks, countless regulatory hiccups and last-minute negotiations, Nippon Steel secured its much-wanted prize late last week when US President Donald Trump approved the US$14.1 billion (S$18 billion) purchase of US Steel.

Now the Japanese giant's shareholders will begin to weigh the benefits of its biggest ever overseas bet. They will also be keeping a watchful eye on costs, which include a promise to invest US$14 billion over the coming years and significant concessions to the US government that will leave Washington with a say in major decisions and control over some board seats.

The first concern will be financing, necessary to fund the all-cash acquisition and the promised investments, which range from upgrades to existing plants to a new steel mill – and how to do that while limiting the dilution of existing shareholders if new equity is issued.