Market Analysis

Reportedly, Biden is on the verge of thwarting Nippon Steel's acquisition of U.S. Steel

Amos Simanungkalit · 05 Sep 202444.9K Views

The White House is expected to block Nippon Steel’s $14.9 billion acquisition of U.S. Steel due to national security concerns, according to two sources familiar with the matter, as bipartisan opposition grows against the deal. The decision, which could be announced as soon as this week, follows warnings from U.S. Steel that failure to complete the acquisition may result in job losses and the potential closure of steel mills, with the company considering relocating its headquarters from Pennsylvania, a key political state.

The potential blocking of the deal, first reported by The Washington Post, could strain U.S.-Japan relations, despite Japan being a close ally. U.S. Steel shares dropped by 17.5%, while Nippon Steel shares briefly fell 1.6% in Tokyo, later recovering slightly.

Both Nippon Steel and U.S. Steel stated they had not received updates from the Committee on Foreign Investment in the United States (CFIUS), which is reviewing the deal, and maintained that the acquisition poses no national security threat. U.S. Steel emphasized its belief in pursuing all legal options to ensure the transaction closes, while Nippon Steel urged the U.S. government to handle the matter according to the law.

Political opposition to the acquisition has emerged from both parties. Vice President Kamala Harris, a Democratic presidential candidate, has voiced her desire for U.S. Steel to remain under American ownership. Former President Donald Trump, a Republican candidate, has pledged to block the deal if elected. Both candidates have made frequent visits to Pennsylvania, a crucial swing state for the 2024 presidential election.

The panel reviewing the merger has yet to send its recommendation to President Joe Biden. While White House officials have not confirmed Biden’s plans, spokesperson John Kirby reiterated the president’s stance that American steel companies should remain American-owned. The Treasury Department, which oversees the national security approval process, declined to comment.

U.S. Steel employees held a rally outside the company’s headquarters, urging policymakers to reconsider their opposition to the acquisition. CEO David Burritt warned that the deal’s collapse would force the company to shift away from blast furnace operations, jeopardizing union jobs and affecting communities tied to its facilities. He also hinted that U.S. Steel might move its headquarters out of Pittsburgh if the deal fails, possibly relocating to the southern U.S.

The United Steelworkers union criticized Burritt’s remarks as baseless and unlawful threats, accusing the company of desperation to save the deal.

Nippon Steel has promised to invest over $2.7 billion in union-represented facilities in Pennsylvania and Indiana if the deal proceeds. U.S. Steel, however, noted that if the acquisition is blocked, it will not make the same financial commitments. Nippon Steel has also assured that U.S. Steel’s senior management and most board members would remain U.S. citizens under the deal.

While the acquisition has already received regulatory approval from outside the U.S. and U.S. Steel shareholders, it remains under regulatory review within the United States.