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.
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