The proposed $14.1 billion acquisition of U.S. Steel by Japan’s Nippon Steel is facing an uphill battle, with President Joe Biden set to block the deal later this month on national security grounds. The Committee on Foreign Investment in the United States, which has been reviewing the merger, is expected to refer its decision to the President by December 22 or 23. While the exact contents of the CFIUS review are not yet clear, reports suggest that Biden will take action to prevent the deal, a decision that has already sent U.S. Steel’s stock tumbling.
The CFIUS review process has been ongoing for much of 2024, with the panel tasked with evaluating whether the merger poses any national security risks. The primary concern surrounding the acquisition is the potential impact on the U.S. steel industry’s ability to meet the country’s domestic needs for critical infrastructure projects. These include essential sectors like transportation, construction, and agriculture, all of which depend on a stable and reliable supply of steel. U.S. Steel, one of America’s largest steel manufacturers, is seen as a vital player in ensuring that these sectors remain supplied with the materials needed to sustain the U.S. economy.
President Biden has made it clear that his administration views U.S. Steel as an important asset for national security and believes it should remain under domestic ownership. In a statement from the White House, Saloni Sharma, a spokesperson, reiterated Biden’s position, saying, “It is vital for U.S. Steel to be domestically owned and operated.” Despite this opposition, Nippon Steel has remained steadfast in its pursuit of the acquisition, arguing that it is committed to maintaining U.S. Steel’s production capacity and jobs within the United States. Nippon Steel also pledged that it would not interfere with U.S. Steel’s trade decisions, including the pursuit of trade measures against unfair practices.
Nippon Steel has been vocal in its criticism of the politicized nature of the CFIUS review. In a statement, the company expressed its belief that national security concerns should be addressed based on factual considerations, rather than political motives. “It is inappropriate that politics continue to outweigh true national security interests,” Nippon Steel said, emphasizing its confidence in the fairness of the U.S. legal system. The company also made it clear that, if necessary, it would work with U.S. Steel to explore all available legal measures to reach a fair conclusion, signaling that litigation could be a likely outcome if the deal is blocked.
The proposed merger has garnered significant opposition within the U.S., with both Biden and former President Donald Trump expressing their opposition to the deal. A key point of contention has been concerns that the merger could undermine the U.S. steel industry’s competitiveness and reduce the domestic supply of steel, particularly at a time when the U.S. is working to strengthen its infrastructure and manufacturing base. The United Steelworkers union has also raised alarms, arguing that the merger could lead to job losses and weaken the bargaining power of workers in the steel sector.
Despite these concerns, Nippon Steel has continued to push for the merger, promising not to move any of U.S. Steel’s production capacity or jobs outside the United States. In an attempt to win over labor unions and workers, Nippon Steel also announced that it would offer employees a $5,000 bonus if the deal proceeds. The company extended this offer to union and non-union workers alike, signaling its commitment to supporting the workforce. Additionally, Nippon Steel pledged to provide €3,000 ($3,160) closing bonuses to its employees in Europe, contributing to an overall payment of nearly $100 million to employees across the globe.
While the final decision rests with President Biden, the outcome of this deal could have significant implications for the future of the U.S. steel industry. If the deal is blocked, it would reinforce the government’s stance on protecting critical domestic industries from foreign control. On the other hand, if the merger is allowed to proceed, it could pave the way for further consolidation in the U.S. steel industry, potentially giving Nippon Steel greater influence over the domestic steel market. Given the high stakes, both Nippon Steel and U.S. Steel are likely to pursue litigation if the merger is blocked, challenging the decision through legal avenues.
The CFIUS process and its eventual outcome are closely watched by industry stakeholders, investors, and policymakers, as the decision could set a precedent for future foreign investments in critical U.S. industries. The situation remains fluid, with both companies preparing for the possibility of a lengthy legal battle should the merger be halted by the President. As the December 22 deadline approaches, all eyes will be on the White House to see whether Biden will approve or block the deal, and what legal actions may follow.
