Justin Merriman/Getty Images via Bloomberg
The Key Takeaways
- President Joe Biden on Friday blocked the proposed $14 billion acquisition of U.S. Steel by Japan's Nippon Steel.
- The companies in a joint statement vowed to "take all appropriate action to protect [their] legal rights."
- Cleveland-Cliffs, an Ohio-based company, had offered before to buy U.S. Steel. This proposal was met with less resistance from politicians as well as workers.
Joe Biden blocked Nippon Steel’s acquisition of U.S. Steel by U.S. Steel X for $14 Billion on Friday, putting the fate of the storied American steelmaker in question.
From the beginning, there were many obstacles to this deal. Political leaders on both sides came out quickly against the merger, saying it threatened national security and would undermine U.S. protections in the trade arena. Others expressed concern that Nippon wouldn’t protect American jobs. This was also a concern of the United Steelworkers Union, who also opposed the deal.
It appeared that the acquisition was doomed after the Committee on Foreign Investment in the United States, (CFIUS), failed to agree on the security risk of the transaction late last year and passed the decision on to Biden who has repeatedly expressed his opposition.
Can US Steel Challenge Biden's Decision?
U.S. Steel could sue Nippon if it fails to influence regulators in light of the White House decision. Albertsons took this route last month, after the federal court blocked its $25-billion merger with Kroger. A joint statement by the two companies, however, suggested this was not likely.
U.S. Steel, Nippon and other companies signaled their intention to continue with the purchase on Friday. "We continue to believe that a partnership between Nippon Steel and U.S. Steel is the best way to ensure that U.S. Steel … will be able to compete and thrive well into the future—and we will … take all appropriate action to protect our legal rights and secure that future," the companies said. They vowed "to deliver the agreed upon value of $55.00 per share for U.S. Steel's stockholders upon closing."
Companies could appeal the decision by claiming that CFIUS and the White House violated standard procedures. The companies on Friday alleged regulators "did not give due consideration to a single mitigation proposal" they had offered. The review process, they said, "was deeply corrupted by politics, and the outcome was pre-determined."
US Steel has other interested buyers
Nippon would have to pay U.S. Steel $565 Million if they failed to prove that their review process had been flawed. That amount, while significant, likely wouldn't be enough to address the problems that compelled U.S. Steel to sell itself in the first place.
Cleveland-Cliffs offered to buy U.S. Steel for 2023, but only ceded after Nippon’s deal was announced that December. This domestic tie up, if it were to be revived, could face less opposition from Washington. It would also likely receive the backing of United Steelworkers who had approved Cleveland-Cliffs initial offer.
Cleveland-Cliffs’ CEO Lourenco Goncalves said that he is still interested in U.S. Steel. However, there are no guarantees the company will make a new offer as they recently acquired Canadian steelmaker Stelco for nearly $3 billion.
According to steel analyst Josh Spoores, instead, the company may be sold in pieces. "It's hard to see any steel entity as they are today buying all of US Steel," Spoores told Bloomberg in September.
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U.S. Steel. “Nippon Steel Corporation and U. S. Steel Condemn U.S. Government’s Unlawful Decision to Block Proposed Acquisition of U. S. Steel.”
Securities and Exchange Commission "SCHEDULE 14A."
Cleveland-Cliffs. "Cleveland-Cliffs Completes Acquisition of Stelco."
Bloomberg. "US Steel Assets Face Chopping Block Without Japan Deal."
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