Transcript: US Steel gets a new owner

This is an audio transcript of the FT News Briefing podcast episode: ‘US Steel gets a new owner’

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Marc Filippino
Good morning from the Financial Times. Today is Tuesday, December 19th, and this is your FT News Briefing. 

An activist investor has upped its stake in UBS. And Nippon Steel is buying an American steel legend. Plus, towns are trying to figure out what to do with outdated coal plants. One answer? Blow them up. I’m Marc Filippino, and here’s the news you need to start your day. 

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Cevian Capital has taken a €1.2bn stake in UBS. The activist investor thinks that the Swiss bank can double its valuation over the next three to five years. It’s a pretty big bet for Cevian. It’s now a top-10 investor in UBS and Cevian apparently had its eye on UBS for a while. Sources said it’s been tracking the bank for 15 years. It even came close to taking an activist position in Credit Suisse, but backed off. Probably a good call — Credit Suisse collapsed earlier this year. Then UBS took it over. 

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Japan’s Nippon Steel has agreed to buy the American company US Steel in a deal worth close to $15bn. If it’s approved by US regulators, it would be the Japanese group’s largest ever acquisition. Our Asia business editor, Leo Lewis, joins me to discuss what’s in it for both sides. Hi, Leo. 

Leo Lewis
Hello, Marc. 

Marc Filippino
All right. So how are people feeling about this deal in Japan? 

Leo Lewis
Well, it comes as part of a sort of wave of deals that have been flagged by bankers. Japan is a country where the population is shrinking, and in the longer term, the economy will come under a lot of pressure. And Japanese companies, those that have got the cash, have been looking for these big transformative overseas deals. And so with the case of Nippon Steel, it’s already the world’s fourth biggest steelmaker by production. It’s obviously been looking for acquisitions and here is US Steel, which has been on the block since August. And so I guess there’s not that much surprise that amongst the bidders there’d be a deep-pocketed Japanese company looking to expand its global footprint. 

Marc Filippino
Now, is this a good deal for US Steel? Its share price rose 26 per cent yesterday, so I have to imagine that the answer is somewhere around yes. 

Leo Lewis
Well, looking at it from US Steel’s perspective, yes, it’s an extremely good deal. If you look back to where their shares were trading in the early part of the summer, here we are with a bid from Nippon Steel, that’s more than 140 per cent higher than that level. And so US Steel shareholders are in pretty good shape. 

Marc Filippino
Leo, what about Nippon Steel? Is that a good investment for the Japanese company? 

Leo Lewis
Well, Nippon Steel, in common with a lot of Japanese companies, do feel that they have fallen behind certainly some of their Chinese and Asian rivals in terms of output. And got to remember that Japanese companies for a while were the biggest steelmakers in the world and have fallen back. So, yes, I mean, they’re looking for expansion and here’s a big opportunity. Japanese companies do tend to prefer to make their big acquisitions in America. So from that perspective, they’ll look pretty happily at this. But the Nippon Steel shareholders, fund managers who hold this stock saying, look, you know, this is yet another example of a Japanese company that is probably massively overpaying for its acquisition. So one of the criticisms I think that’s going to build behind this deal and we’ll see in the share price of Nippon Steel is the idea that they’ve gone ahead with this very, very generously priced deal without necessarily thinking too much about what this means for their shareholder base. 

Marc Filippino
Yeah, but is there a kind of symbolic importance in this deal for Japan? 

Leo Lewis
Yes. Symbolically, it’s very important, but it’s also important as a sort of general signal from corporate Japan that look, it’s not gonna let the weak yen cause it to postpone deals that it may have been thinking about and that companies may be looking at. So the message, I suppose, more generally is, look, yeah, do continue to expect Japanese companies to be in the mix as the global M&A markets find their feet again after the sort of hiatus of the pandemic. 

Marc Filippino
Leo Lewis is the FT’s Asia business editor. Thanks, Leo. 

Leo Lewis
No problem at all. 

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Marc Filippino
Coal-fired power plants in the US and in the UK have been disappearing in recent years. Sometimes they’re converted for battery storage or renewable energy projects, but mostly they’re just demolished. Now, that may be good for the move to a greener economy, but it also means that coal communities are losing their symbols and sometimes a sense of local identity. FT audio producer Josh Gabert-Doyon went to go watch the demolition of four massive cooling towers at a coal plant that was closed three years ago. He brought us this dispatch. 

Josh Gabert-Doyon voice clip
Residents of Widnes, near Liverpool, knew that the demolition would take place at some point between 8am and noon, but hadn’t been told exactly when. So on that frosty Sunday morning in early December, hundreds of residents came out early. They bundled up with chairs, thermoses of tea, pint glasses, dogs and excited children. And they came to watch the first phase in the demolition of a local landmark. One of the best places to see the blast was on a strip of muddy land outside the Eight Towers pub, which face directly towards the Fiddler’s Ferry coal-fired power station. 

Unnamed male interviewee voice clip
It’s kind of been a focal point all of my life, (inaudible) with us . . . 

Unnamed female interviewee voice clip
We have stood right in front of the towers, very, very foggy. They are coming out as the fog clears. So we’re just waiting for the big moment . . . 

Unnamed young interviewee voice clip
We’re coming to watch this Fiddler’s Ferry getting blown down.

Josh Gabert-Doyon voice clip
And how are you feeling about it?

Unnamed young interviewee voice clip
Happy. 

Josh Gabert-Doyon voice clip
Why happy? 

Unnamed young interviewee voice clip
’Cause I just want to see it explode. 

Josh Gabert-Doyon voice clip
The towers have been an imposing but much loved presence in the area for over 50 years. But their demolition is part of the UK’s transition away from coal and towards a green economy. The redevelopment will see Fiddler’s Ferry torn down and converted into new houses, new commercial space with the promise of jobs and a battery storage plant that will help with the move to renewable energy. While the vast majority of people I spoke to were supportive of a transition away from fossil fuels, there were conflicted feelings about destroying the towers and forfeiting their industrial history. 

Unnamed interviewee voice clip
It’s a monument to an industry which is beginning to die away with new, sustainable forms of energy. 

Unnamed interviewee voice clip
There’s just a bit of a shame, really, because it’s quite iconic. Everybody knows it when you see the dome, isn’t it? 

Josh Gabert-Doyon voice clip
As unsightly as the cooling towers might seem to outsiders, they have a strong cultural significance for the area. It sets Widnes apart, gives it an identity. The eight towers are featured in the opening of the sitcom Two Pints of Lager and a Packet of Crisps, and were the backdrop to a rowdy and still legendary Stone Roses concert that took place in 1990.

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For the onlookers who had grown up under the shadow of Fiddler’s Ferry, there was a real urge to protect and conserve it. 

Unnamed interviewee voice clip
I get the whole fossil fuel argument, but I think from a personal point of view, I would like to have seen it used as another social space for people. 

Unnamed interviewee voice clip
I think it should have been saved for future generations to actually view as a museum and enjoy it. 

Josh Gabert-Doyon voice clip
Just after 9:30am, an attendant in a hi-vis jacket gave the signal. 

Voice clip
It’s coming after 25-10. 

Josh Gabert-Doyon voice clip
And the excited crowd started a countdown to the demolition. (Crowd counting down) There was a short, dull blast, followed by a shockwave that hit deep in the chest. (Explosions) The towers crumpled into the fog. Car alarms went off in the distance and a thin white dust moved steadily towards the crowd. Some people cried, some were cheering, and others just started the slow walk back to their cars. 

Unnamed interviewee voice clip
Felt a bit of a pang as I sightsee it fall down, you know. It’s a sight, exciting and fairly well, but also a bit sad as well. 

Josh Gabert-Doyon voice clip
This is Josh Gabert-Doyon reporting for the FT News Briefing from Fiddler’s Ferry in Widnes outside Liverpool. 

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Marc Filippino
Before we go, a judge in New York yesterday sentenced Trevor Milton to four years in prison. Milton is the founder of the electric and hydrogen-powered truckmaker Nikola. He was charged with lying to investors to boost the company’s share price. Now, you might remember this story. Hindenburg Research released a report in 2020 calling the company an intricate fraud. Hindenburg also claimed that Nikola had faked a product video. It said the company rolled one of its trucks along a downhill stretch of highway to disguise the fact that it had no working engine.

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You can read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news. 

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