On Monday, United States Steel and Japan's Nippon Steel initiated legal proceedings contesting President Joe Biden's recent decision to block their proposed acquisition deal. This move follows Biden's declaration last week, where he cited national security concerns and supply chain risks due to the potential merger between the two steel giants. In December 2023, Nippon Steel expressed its intent to acquire US Steel for an impressive sum of $14.1 billion in cash, alongside assuming its existing debt obligations.
The companies assert that such a transaction would foster enhanced security for the United States rather than jeopardize it. In a collective statement, the steel manufacturers revealed that they have lodged a petition with the US Court of Appeals for the District of Columbia Circuit. They argue against what they deem an "unlawful" review process executed by the Committee on Foreign Investment in the United States (CFIUS).
Last month, the CFIUS referred their deal to President Biden after failing to reach a consensus on whether or not to allow it. The suit alleges that CFIUS did not carry out a just review due to what the companies described as Biden's "undue influence aimed at advancing his political agenda." They contend that the President's actions were made to curry favor with the United Steelworkers union, formally known as United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (USW). Both Nippon Steel and US Steel emphasized their commitment to the transaction from the beginning, citing their collaboration and good faith engagement with all involved parties to exemplify how the merger would actually bolster, rather than undermine, U.S.
national security. They articulated their ongoing dedication to following through with the transaction in light of the legal proceedings. A White House spokesperson informed that a committee composed of national security and trade experts opted against the merger, reaffirming that "President Biden will never hesitate to protect the security of this nation, its infrastructure, and the resilience of its supply chains." This statement underpins the administration’s stance on ensuring national security is not compromised. In a parallel legal approach, US Steel and Nippon leveraged a complaint against Cleveland-Cliffs and its Chief Executive Lourenco Goncalves, as well as David McCall, president of the USW, in the US District Court for the Western District of Pennsylvania.
The steelmakers accuse these individuals of participating in "illegal and coordinated" actions aimed at thwarting their acquisition. According to McCall, by obstructing Nippon Steel's acquisition of US Steel, the Biden administration prioritized critical U.S. interests, safeguarding national security, and sustaining the domestic steel industry that plays a vital role in the country's supply chains.
The USW president claimed, "We are reviewing the complaint and will vigorously defend against these baseless allegations." Reflecting on the contentious nature of this situation, the companies are keen to advance their legal cases promptly. They expressed unwavering confidence that the acquisition remains the optimal route for securing US Steel's future, reiterating their readiness to defend against any obstructions. Despite a previously pledged investment of $2.7 billion by Nippon Steel into US Steel's unionized facilities, the proposed merger faced resistance from the United Steelworkers union who argued that the deal lacked commitments for long-term production guarantees or bolstered domestic capacity within integrated facilities. Cleveland-Cliffs did not provide any comments to the inquiry made by MT Newswires.
As this legal saga unfolds, industry stakeholders remain keenly focused on how these developments will impact the broader steel market and national security considerations..