Japan's Nippon Steel clinched a deal on Monday to buy U.S. Steel for $14.9 billion in cash, prevailing in an auction for the 122-year-old iconic steelmaker over rivals including Cleveland-Cliffs, ArcelorMittal and Nucor.

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The deal price of $55 per share represents a whopping 142 per cent premium to August 11, the last trading day before Cleveland-Cliffs unveiled a $35-per-share, cash-and-stock bid for U.S. Steel. It is a bet that U.S. Steel will benefit from the spending and tax incentives in President Joe Biden's infrastructure bill.

Cleveland-Cliffs' pursuit prompted U.S. Steel to launch a sale process four months ago. In a meeting of its board of directors on Sunday, U.S. Steel deemed Nippon's offer superior to a sale to Cleveland-Cliffs, which had raised its bid in the high $40-per-share range, people familiar with the matter said.

Nucor, the largest U.S. steelmaker, offered to acquire U.S. Steel in partnership with another company, one of the sources said. The identity of that company could not be learned.

ArcelorMittal also pursued U.S. Steel, Reuters has reported. Nippon and ArcelorMittal own a plant in Alabama that produces steel sheet products by processing semi-finished products, or slabs, procured from local and overseas suppliers. They are also investing about $1 billion in an electric arc furnace.

The acquisition of U.S. Steel will help Nippon, the world's fourth largest steel maker, move toward 100 million metric tons of global crude steel capacity, while significantly expanding its production in the United States, where steel prices are expected to rise as automakers ramp up production following their recent deals with labor unions to end strikes.

Nippon did not give any projection on the value of the synergies that will arise from the deal, to justify the price it agreed to pay. It said the synergies will come from pooling advanced production technology and know-how in product development, operations, energy savings and recycling.

Nippon is paying the equivalent of 7.3 times U.S. Steel's 12-month earnings before interest, taxes, depreciation and amortization, LSEG data shows. The median in the steelmaking industry is seven times, and some analysts said U.S. Steel was worth less given that its $774 million takeover of the Big River steel mill in Arkansas in 2021 has yet to pay off in profitability.

"We feel Nippon is overpaying for those assets. This isn’t the technology space. This is still the cyclical steel industry," said Gordon Johnson, analyst at GLJ Research.

U.S Steel shares ended trading up 26 per cent at $49.59 on Monday following the deal announcement. Nippon Steel shares had ended trading in Tokyo before the company unveiled the deal.

Cliffs shares jumped 10 per cent to $20.50 in New York as shareholders cheered the company deciding against splashing out on U.S. Steel. Cliffs said it would now press on with "aggressive share buybacks" under a program it had previously authorized.

ArcelorMittal shares also rose 5 per cent to 26.28 euros in Amsterdam on similar investor relief.

Losing the auction for U.S. Steel will also likely result in Cliffs failing to renew a contract to provide slabs to ArcelorMittal and Nippon's Alabama plant that expires in 2025, the sources said. This is because Nippon will now turn to U.S. Steel as a supplier, the sources added. The value of the contact could not be learned.