Biden speech likely to extend review of U.S. Steel deal, says Morgan Stanley

Morgan Stanley notes that President Joe Biden voiced his concerns about Nippon Steel’s (NPSCY) proposed acquisition of U.S. Steel (X) in a speech today and expects that today’s speech is likely to extend the review process and may introduce more risk/uncertainty into the closing of an eventual transaction. However, the firm continues to believe that an acquisition by Nippon Steel would not represent a major threat to national security. In the event a deal with Nippon were to be terminated, the firm would not expect U.S. Steel shares to return to the roughly $25 per share level at which they traded prior to the announced bid from Cleveland-Cliffs (CLF) that kicked off the company’s strategic review, but thinks shares could potentially fall to about the $35 per share level. The firm, which notes that its mid-2024 base case valuation is $47, somewhat below its $51 price target, sees that base case as fair value on a stand-alone basis. Morgan Stanley keeps an Equal Weight rating on U.S. Steel shares.