US President Joe Biden officially blocked Nippon Steel’s proposed $14.9 billion purchase of US Steel yesterday, citing national security concerns, in a move that dealt a probably fatal blow to the contentious merger plan after a year of review.
“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.”
The deal was announced in December 2023 and almost immediately ran into political opposition ahead of the November 5 US presidential election. Both then-candidate Donald Trump and Biden vowed to block the purchase of the storied American firm, the first-ever corporation valued at more than $1bn and which once controlled most of the country’s steel output.
Nippon paid a hefty premium to clinch the deal and made several concessions, including a last-ditch gambit to give the US government veto power over changes to output. The Pittsburgh-based company has warned that thousands of jobs would be at risk without the deal. Analysts say another buyer could emerge, with suitors including Ohio-based Cleveland-Cliffs.
The Committee on Foreign Investment in the United States (CFIUS) spent months reviewing the deal for national security risks but referred the decision to Biden in December, after failing to reach consensus.
Nippon Steel has previously threatened legal action if the deal was blocked.
Shares of US Steel were down 7 per cent to $30.32 in early trading on the New York Stock Exchange.
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 has exclusively reported. A spokesperson for Ishiba could not be reached for comment on Friday before the announcement and Japan’s trade ministry declined to comment ahead of the formal announcement of a decision. United Steelworkers president David McCall praised Biden’s decision, saying the union has “no doubt that it’s the right move for our members and our national security.”
Japan is a key US ally in the Indo-Pacific region, where China’s economic and military rise and threats from North Korea have raised concerns in Washington. It is also the top investor in the US and Keidanren, its biggest business lobby, has previously aired concerns that the review was facing political pressure.
Blocking the deal may dissuade international investors from bidding for politically sensitive US companies with a unionised workforce in the short term, said Alistair Ramsay, vice president of steel research at consultancy Rystad Energy.
“Big bids are a risky idea less than 12 months from a presidential election, but big steel producers with traditional operating furnaces, such as Nippon Steel, see the US as an excellent place to produce steel in the long term, despite the market depression there,” he added. Lawyers including Nick Wall, M&A partner at Allen & Overy, have said Nippon’s vow to mount a legal challenge against the US government would be tough.
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