Nippon Steel to sue Washington after Biden blocks US$14.1B US Steel deal – Nikkei

Nippon Steel says it will sue the United States government, challenging the procedures behind President Joe Biden’s order to block its acquisition of US Steel, Japan’s Nikkei business daily reported.

Biden nixed the US$14.1 billion deal on Friday, citing national security concerns. 

“A strong domestically owned and operated steel industry represents an essential national security priority and is critical for resilient supply chains,” Biden said in a statement. “Without domestic steel production and domestic steel workers, our nation is less strong and less secure.”

President-elect Donald Trump has also vowed to prevent the transaction.

Shares of US Steel dropped 5% to US$30.68 in New York at mid-Friday. 

Nippon Steel and US Steel condemned the block in a joint statement, calling the decision unlawful.

“We are dismayed by President Biden’s decision to block Nippon Steel’s acquisition of U.S. Steel, which constitutes a clear violation of due process. Instead of adhering to the law, the process was manipulated to advance President Biden’s political agenda.

“Following this decision, we are left with no choice but to take all appropriate actions to protect our legal rights.”

Timeline

The deal was announced in December 2023 and immediately sparked political debate and pressure from steelworkers concerned about potential job losses.

Nippon paid a premium to clinch the deal and made several concessions, including allowing the U.S. government veto power over changes to output. Japan’s biggest steelmaker also hired former U.S. Secretary of State Mike Pompeo to help with its effort to acquire US Steel.

In a November letter, Japanese Prime Minister Shigeru Ishiba urged Biden to approve the merger so as to avoid marring recent efforts to strengthen ties between the two countries, Reuters reported.

US Steel has warned that thousands of jobs would be at risk without the deal.

The Committee on Foreign Investment in the United States (CFIUS) spent months examining the deal for national security concerns but referred the decision to Biden in December after failing to reach a consensus.

The deal “would place one of America’s largest steel producers under foreign control and create risk for our national security and our critical supply chains, Biden said Friday. He announced his formal decision after the case was referred to him by a U.S. security review panel. 

With the order, the companies have to formally abandon the deal within 30 days. Biden also authorized the Attorney General to enforce the decision.

Challenges ahead

Biden’s order leaves US Steel facing challenging decisions, including the potential need to restart the sale process. Cleveland-Cliffs Inc., which initially sought to acquire US Steel before Nippon Steel secured the bid, has since acquired a Canadian producer.

The companies have indicated they may contest the legal basis of any potential block, suggesting the issue could remain unresolved. 

Today’s announcement was a massive victory for United Steelworkers President David McCall and his union’s leadership, who have been strongly opposed to the deal.

McCall in a statement Friday said that Nippon Steel has undermined the domestic steel industry and that allowing the deal to advance would destabilize the US trade system and compromise national security.

“It’s clear from U.S. Steel’s recent financial performance that it can easily remain a strong and resilient company,” McCall said.

“We now call on U.S. Steel’s board of directors to take the necessary steps to allow it to further flourish and remain profitable.”