January 3, 2025
President Joe Biden on Friday blocked Japanese steel giant Nippon's $14 billion acquisition of U.S. Steel ( X ), throwing into question the prospects of the storied steelmaker.
The U.S. Steel-Nippon deal faced headwinds from the jump. Politicians on both sides of the aisle swiftly came out against the tie-up, alleging it would threaten national security and undermine U.S. trade protections. Some also expressed doubt that Nippon would protect American jobs, a concern shared by the United Steelworkers union, which also opposed the deal.
The acquisition appeared all but doomed when the Committee on Foreign Investment in the United States (CFIUS) late last month failed to reach a consensus on the deal's security risks and punted the decision to Biden, who had repeatedly voiced his opposition.
One option for U.S. Steel in the wake of the White House's decision is to sue Nippon for failing to sway regulators. That's the path grocery chain Albertsons chose last month after its $25 billion merger with rival Kroger was blocked in federal court. However, a joint statement from the companies suggested that was unlikely.
U.S. Steel and Nippon on Friday signaled they would continue to pursue the acquisition. "We continue to believe that a partnership between Nippon Steel and U.S. Steel is the best way to ensure that U.S. Steel … will be able to compete and thrive well into the future—and we will … take all appropriate action to protect our legal rights and secure that future," the companies said. They vowed "to deliver the agreed upon value of $55.00 per share for U.S. Steel's stockholders upon closing."
The companies could challenge the decision on the grounds that the White House and CFIUS circumvented standard procedure. The companies on Friday alleged regulators "did not give due consideration to a single mitigation proposal" they had offered. The review process, they said, "was deeply corrupted by politics, and the outcome was pre-determined."
Should the companies fail to convince a court that the review process was flawed, U.S. Steel would be entitled to a $565 million payout from Nippon for its failure to close the deal. That amount, while significant, likely wouldn't be enough to address the problems that compelled U.S. Steel to sell itself in the first place.
Domestic rival Cleveland-Cliffs ( CLF ) offered to buy U.S. Steel in 2023 and only gave up after the Nippon deal was announced in December of that year. That domestic tie-up, if revived, would face much less resistance in Washington, and would likely have the support of the United Steelworkers, who approved of Cleveland-Cliffs' initial offer.
Cleveland-Cliffs CEO Lourenco Goncalves has said he's still interested in U.S. Steel, though there's no guarantee the company would make a second offer, as it recently closed a nearly $3 billion acquisition of Canadian steelmaker Stelco.
Instead, the company could get sold off in parts, according to steel analyst Josh Spoores. "It's hard to see any steel entity as they are today buying all of US Steel," Spoores told Bloomberg in September.
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