Nippon Steel president says suing US govt over rejected bid is an option
Sign up now: Get insights on Asia's fast-moving developments
Follow topic:
TOKYO - Nippon Steel president Tadashi Imai said filing a lawsuit against the US government is one of the “important options”, Nippon Television reported on Jan 6, after US President Joe Biden blocked its proposed purchase of US Steel
Mr Imai told reporters that the US government’s reviewing process and the decisions over its acquisition proposal did not seem properly handled, adding that Nippon Steel is “entitled to a proper review”, according to the report.
Mr Biden cited national security concerns for rejecting the US$14.9 billion (S$20.4 billion) bid on Jan 3 after a year of review.
Mr Imai said it would not take long for the company to announce countermeasures to the US government’s decision, the report said.
Shares in Nippon Steel fell only slightly on Jan 6 in their first trading since Mr Biden rejected the deal. His opposition to the deal had been well flagged, and US Steel shares had been trading far below the offer price as a result.
“Some investors may view the failure of the US Steel acquisition as alleviating financial concerns due to the substantial amount of money involved in the deal,” said Naito Securities chief strategist Yoshihiko Tabei.
Nippon Steel had not finalised a permanent financing plan for the all-cash deal, but said raising equity was among the possibilities.
Mr Tabei, however, noted that uncertainty remains, as achieving medium- to long-term growth will likely be challenging without expanding operations in the US.
With US Steel, Nippon Steel aimed to raise its global steel production capacity to 85 million tonnes per year from 65 million tonnes now, nearing its long-term goal of lifting production capacity to 100 million tonnes.
The proposed deal has not yet been terminated by the companies, even after Mr Biden blocked the purchase.
In a joint statement, Nippon Steel and US Steel called Mr Biden’s decision “unlawful” and said they were left with no choice but to take all appropriate actions to protect their legal rights.
Nippon Steel will owe US Steel a US$565 million break fee if the deal is not completed.
Still, some analysts think the failure of the deal could boost shares in Nippon Steel.
“Even if the deal does not proceed, Nippon Steel’s earnings outlook remains unchanged, with significant growth expected in the next financial year starting in April,” Nomura Securities analyst Yuji Matsumoto said in a note.
“Additionally, the removal of financing uncertainty related to the acquisition is likely to support a near-term increase in the stock price,” he said.
A Nippon Steel spokesperson confirmed it plans to hold a press conference to discuss the US government’s decision, though no date has been set. Kyodo News reported that the press conference will be held on Jan 7. REUTERS
