What’s next after Biden blocked Nippon Steel from buying US Steel?
Sign up now: Get ST's newsletters delivered to your inbox
The proposed deal has not yet been terminated by the companies even after Mr Biden blocked the deal.
PHOTO: REUTERS
Follow topic:
WASHINGTON - US President Joe Biden blocked Nippon Steel’s proposed US$14.9 billion (S$20.4 billion) purchase of US Steel citing national security concerns, in a potentially fatal blow to the deal after a year-long review.
Mr Biden, US President-elect Donald Trump and an influential labour union opposed the effort by Japan’s top steelmaker to acquire the iconic American firm
The path forward is unclear. The companies could sue the US government, another buyer could swoop in for US Steel, or Republicans who favour the deal could urge Trump to find a way to approve it.
Here is what could come next:
The deal itself
The proposed deal has not yet been terminated by the companies even after Mr Biden blocked the deal.
In a joint statement, Nippon and US Steel called Mr Biden’s decision “unlawful”, and Nippon Steel may file a lawsuit against the US government challenging the procedures behind the decision, Japan’s Nikkei business daily reported on Jan 4.
US Steel chief executive David Burritt said on Jan 3: “We intend to fight President Biden’s political corruption.”
In a separate statement, he said: “President Biden’s action today is shameful and corrupt. He gave a political payback to a union boss out of touch with his members while harming our company’s future, our workers, and our national security. He insulted Japan, a vital economic and national security ally, and put American competitiveness at risk.”
He added: “The Chinese Communist Party leaders in Beijing are dancing in the streets. And Biden did it all while refusing to even meet with us to learn the facts.”
Some lawyers, such as Mr Nick Wall, M&A partner at Allen & Overy, have said a legal challenge would be tough.
Nippon Steel argued it made numerous concessions, including offering to move its headquarters to Pittsburgh, to meet the demands of the Committee on Foreign Investment in the US (CFIUS), the panel that decides on whether foreign purchases of US companies should go forward.
CFIUS was split over a decision and did not make a recommendation on the deal.
“If they go to court, most of the decisions by the various CFIUS agencies will be made public,” said Mr Brett Lambert, a former senior Pentagon official under former president Barack Obama, citing the rare move to forward a split decision to the President.
If the deal does not go through, Nippon Steel would have to pay a US$565 million break-up fee.
US Steel’s future
Pittsburgh-based US Steel had warned that mills could close and thousands of jobs would be at risk without the deal.
US Steel’s profits have fallen for nine straight quarters amid a global industry downturn, but it still sports a forward price-to-earnings ratio of 12.87, more expensive than US peers, according to LSEG data.
The United Steelworkers union, which opposed the deal, has called the company’s warnings baseless, saying on Jan 3 that it is clear that US Steel’s recent financial performance shows it “can easily remain a strong and resilient company”.
Other suitors could emerge. US-based Cleveland-Cliffs, which previously bid for the company, could come back with a lower offer. However, its market value is now smaller than that of US Steel.
Mr Jay Woods, chief global strategist at Freedom Capital Markets, said: “One would suspect that Nucor and Cleveland-Cliffs will be in discussions with US Steel, but based on presidential messages one would think the US government may come to its aid and invest in its infrastructure.”
Trump’s position
Trump, who takes office on Jan 20, has repeatedly vowed to block the sale, a view he shared with Mr Biden.
“I am totally against the once great and powerful US Steel being bought by a foreign company, in this case Nippon Steel of Japan,” he wrote on his Truth Social platform in December. “As president, I will block this deal from happening. Buyer beware!!!”
Trump’s transition team did not comment on Jan 3. However, several current and former Republican office holders on Jan 3 criticised Mr Biden’s decision, saying it would cost investment in the US.
US-Japan relations
Some analysts warned that blocking the deal could sour relations between the US and Japan
Japan is the top investor in the US and its biggest business lobby has raised concerns about political pressure on the deal, a view the White House rejected.
Ms Wendy Cutler, who served as a senior trade negotiator under Mr Obama, wrote on X: “It would have helped us rebuild our competitiveness and counter China. To do this effectively, we need our friends, particularly Japan.”
Trump’s stance on trade could add to that unease when he returns to office, as he has already threatened heavy tariffs on key allies Canada, Mexico and Europe. REUTERS
