In an announcement expected as early as Friday, President Biden will block Nippon Steel's $14 billion acquisition of U.S. Steel because it poses a threat to national security, according to people familiar with the matter. has been decided.
The decision would be an unusual exercise of executive power, especially for a president who is only weeks away from leaving office. This is also a departure from the country's long-established culture of open investing, which could have far-reaching implications for the US economy.
Mr. Biden's move to suspend trading may cause foreign investors to reconsider the wisdom of buying U.S. companies in sensitive industries based in politically important states. It could also disrupt relations with Japan, a close U.S. ally and one of the United States' largest sources of foreign investment.
A letter sent to the companies and the White House last month said the president's decision to block the deal meant that the federal commission reviewing the deal had chosen not to make a formal recommendation on whether to allow the deal to proceed. It was received and carried out.
The Committee on Foreign Investment in the United States, which is made up of government agencies such as the Treasury Department and the Justice Department, expressed its disapproval of the deal in a letter to both companies last month. CFIUS (pronounced SIFF-ee-yuhs) expressed concern that the deal could lead to a reduction in U.S. steel production and could pose a national security threat to the United States. Officials suggested it could be important for Nippon Steel to consider other global businesses in the future beyond its investment commitments to U.S. Steel.
The lack of a formal recommendation clears the way for Biden to end the deal, which has become embroiled in election-year politics, barring an unexpected change of heart.
However, this decision could be challenged in court. Japan had said it was prepared to take legal action if the deal was blocked.
Nippon sent a letter to CFIUS last month, accusing the White House of having “unacceptable influence” in the process. Nippon said the concerns raised by CFIUS are “strewn with factual inaccuracies and omissions, misleading and incomplete statements, and assumptions and assumptions that have no basis in fact and are patently illogical.” Ta.
U.S. Steel also continues to pursue this deal. After CFIUS did not make a formal recommendation, the company issued a statement saying the deal was “the best way to date to ensure U.S. Steel, including its employees, communities, and customers, thrives into the future.” It's a method.”
CBS News reported that a decision could be made as early as Friday.
The politics of Biden's decision were clear. U.S. Steel is based in Pennsylvania, a key battleground state, and its powerful labor unions are weighing in on the proposed deal, in part due to concerns that Nippon Steel will not honor its commitments to invest in its factories and protect its business. I was vehemently against it. Workers' pensions. The public debate over the takeover has emerged as a key issue ahead of the 2024 presidential election, with Biden, Vice President Kamala Harris and President-elect Donald J. Trump all saying they want U.S. Steel to remain US-owned. publicly stated that it should be.
Before the election, the Biden administration gave the companies three more months to address concerns about the deal. But by December, CFIUS had told Japan that federal officials were divided over whether to proceed with the deal, and Trump vowed to block the deal after taking office, potentially dooming the deal. It was clear that it was the highest.
“As President, I will stop this deal from happening,” Trump said on social media. “Buyer beware!!!”
Despite his opposition to the steel deal, Trump last month welcomed a $100 billion investment in the U.S. by Japanese technology company SoftBank, which pledged to focus on technology and artificial intelligence over the next four years. did.
Japan's bid faced political opposition from the moment it was announced in December 2023. Democratic senators, including Sherrod Brown of Ohio and Bob Casey of Pennsylvania, along with Sen. J.D. Vance, R-Ohio, who is now vice president, urged him to do this. Biden will consider proposed sales to prevent loss of steel production and jobs. Mr. Brown and Mr. Casey both lost their seats to Republican challengers in November.
Shortly before Christmas last year, the Biden administration appeared to cave in to concerns expressed by lawmakers, with National Economic Council Director Lael Brainard saying the deal “deserves serious scrutiny in terms of its potential impact.” Yes, it seems.'' released a statement. On national security and supply chain reliability. ”
U.S. Steel shareholders approved the deal in April, but its chances have diminished as the presidential election approaches.
Founded in 1901, U.S. Steel has long faced financial difficulties amid changing dynamics in the global metals market and rapidly evolving technology, which has often been slow to adopt technology. The company's metals are used to construct some of America's most famous bridges and buildings, including the Willis Tower in Chicago and the United Nations Building in New York, and at its peak in the 1940s it employed 340,000 workers. , currently has approximately 20,000 employees. Overall, about 4,000 workers are in Pennsylvania.
The post-pandemic boost to the steel market came from a combination of shortages and demand spurred by federal infrastructure spending, but it was showing signs of abating amid concerns about a global economic slowdown. In 2023, U.S. Steel's rival, the Ohio-based Cleveland Cliffs, made an unsolicited offer to acquire a competitor. This started a bidding war, which Japan won.
Japan, the world's fourth largest steel producer, saw an opportunity to further expand its size and gain access to the American market by acquiring US Steel. The United States is seen as a growth market with increased demand for steel in the coming years as the federal government makes major investments in infrastructure and climate technology.
However, the United Steelworkers union quickly voiced its opposition to the deal. The union claimed it was being blindsided by company management and argued that Nippon was unlikely to honor the union's contract and protect workers' pensions. Japan said it would abide by existing agreements.
Trump said early last year that U.S. Steel should remain in American hands. During his first term, Trump imposed sweeping tariffs on foreign steel imports from allies such as Mexico, Canada and Europe, but blocking the Japanese company's acquisition of U.S. Steel would protect America's industrial heritage. said it was a problem.
Under political pressure, Biden expressed a similar opinion in April, insisting that U.S. Steel remain American-owned and operated. Over Labor Day weekend, Harris, who replaced Biden as the Democratic nominee, reiterated that message.
However, not everyone opposed the agreement. Many U.S. Steel employees supported this move, saying the company was in dire need of investment. Last month, three members of the Congressional Black Caucus sent a letter to the White House arguing that the deal is critical to the future of American manufacturing.
Mike Pompeo, who served as secretary of state during Trump's first term and has advised Japan, also told Wall Street that the deal would allow the United States to challenge China's global steel dominance. I wrote it in my journal.
The company's fate remains uncertain, and its efforts to preserve its American roots could have a negative impact on Pennsylvania workers in the long run. With prospects for a deal looking shaky, U.S. Steel's stock price slumped, falling to its lowest point in more than a year in premarket trading on Friday.
Nippon, headquartered in Pittsburgh, had pledged to invest in renovating its factories in the state. U.S. Steel executives have warned that without Japanese-made products, the company may have to lay off workers, relocate its headquarters and invest in a plant being built in the South. The company has received several more acquisition offers, and it remains possible that one of them will come back.
