In a significant move, President Joe Biden has officially blocked the acquisition of United States Steel, commonly known as US Steel, by Japan's Nippon Steel, citing national security concerns and potential risks to supply chains. This decision underscores the administration's commitment to maintaining a robust domestic steel industry, which Biden emphasized is critical for both national security and resilient supply chains.
'A strong domestically owned and operated steel industry represents an essential national security priority and is critical for resilient supply chains,' Biden stated. 'Without domestic steel production and domestic steel workers, our nation is less strong and less secure.' The proposed acquisition, valued at $14.1 billion in cash plus debt assumption, was initially agreed upon in December 2023.
However, the expected closing date of the deal has been pushed to the ongoing quarter from its previous estimate in the latter half of 2024, as updated information was made available on Nippon's corporate website late in December. The call to block this acquisition isn't without precedent, as former President Donald Trump had previously indicated intentions to thwart the transaction.
The Committee on Foreign Investment in the United States brought the deal to Biden’s attention after failing to reach a consensus on its potential clearance. In a bid to sway Biden’s approval, Nippon reportedly made a remarkable offer to grant the US government veto power regarding any potential reductions in production capacity at US Steel's facilities, as documented by The Washington Post at the end of December.
"It is my solemn responsibility as President to ensure that, now and long into the future, America has a strong domestically owned and operated steel industry that can continue to power our national sources of strength at home and abroad; and it is a fulfillment of that responsibility to block foreign ownership of this vital American company," Biden added in his statement on Friday.
In a joint response, US Steel and Nippon expressed their disappointment over Biden's decision, claiming the process was manipulated to forward the president's political agenda. They contended, "The President's statement and order do not present any credible evidence of a national security issue, making clear that this was a political decision." They further indicated plans to take "all appropriate action to protect their legal rights." Following the announcement, the stock price for US Steel fell by 5.8% during trading hours on Friday.
Nippon Steel, renowned for its substantial investments, had previously committed to injecting $2.7 billion into US Steel's unionized operations. Nevertheless, this deal faced opposition from the United Steelworkers union. "According to the press, Nippon says it will allow capacity to be monitored, but once again, it fails to commit to maintaining production for the long term or actually strengthening domestic capacity in integrated facilities," the union remarked on Thursday.
US Steel countered this criticism in an email to MT Newswires, arguing that union leaders misrepresented crucial elements of the Nippon Steel proposal, reiterating that the transaction represented the best path for the future vitality of US Steel and its workforce..