US Steel Falls on Biden's Plan to Voice Concern on Nippon Steel Deal
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(Bloomberg) -- President Joe Biden is expected to soon release a statement of concern about Nippon Steel Corp.’s proposed purchase of United States Steel Corp., people familiar with the matter say. Shares of the Pittsburgh-based company fell the most in almost four years.
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US Steel dropped as much as 15% to $39.86, the biggest intraday loss since June 2020. The move is the latest show of support from the Biden administration for the steel union as it seeks to win better terms from the Japanese steelmaker. Nippon’s proposal is to buy the company for $55 per share in cash. Nippon Steel shares opened modestly lower in Tokyo on Thursday, falling as much as 0.6%.
The scope of what Biden will say, and how far he’ll go, isn’t clear, said the people, who asked not to be named because the information is private. The news was first reported by the Financial Times.
In a joint statement on Wednesday evening, Nippon and US Steel said, “We welcome the administration’s scrutiny of the transaction, as an objective and comprehensive review of this transaction will demonstrate that it strengthens US jobs, competition, and economic and national security.”
“We will continue to advocate for this deal, and we are confident that fair and thoughtful evaluation will result in its approval,” the companies added.
The White House declined to comment.
Biden’s administration has regularly sent warnings about the deal and has steadfastly sided with the United Steelworkers over the sale of a once-iconic firm based in Pennsylvania, a crucial swing state. So far, the White House has stopped short of calling for the deal to be blocked.
Politics hang over the administration’s considerations, with Donald Trump pledging to block the deal outright.
Cfius Review
The Nippon bid for US Steel is up for review by the Committee on Foreign Investment in the United States, or Cfius, a process shrouded in secrecy. Allies of Biden have urged the administration to kill the deal over national security concerns — despite Japan being a close ally — and the threat to unionized steel jobs.
The deal has also been assailed by the USW, with the union’s leader, David McCall, saying in interviews with Bloomberg News that he’s been unhappy with the potential takeover.
The union is seeking explicit guarantees that Nippon will honor all its labor contracts, while Nippon has offered at least $1.4 billion in new capital spending as a sweetener to win the union’s support — which would substantially clear the political path for Biden to let the deal proceed.
McCall and his top aides at the USW met with representatives from Nippon Steel last week. In February, USW said in a statement it had received “personal assurances” that Biden has “our backs.”
‘Serious Scrutiny’
The issue is simmering as the White House prepares to host Japanese Prime Minister Fumio Kishida for a state dinner next month on April 10. The red tape on national security grounds risks straining bilateral ties with a close ally. But the Biden administration is also examining Nippon Steel’s China ties, a potential complication as the administration looks toughen its stance on China.
Japan should persuade the US on the merger by “saying it will contribute to reaching carbon neutrality by 2050,” Satsuki Katayama, a lawmaker from the ruling Liberal Democratic Party, said in a post on social media platform X. “If this combination doesn’t work out, China will be allowed to take the lead.” Japan’s top government spokesman declined to comment on the matter.
White House National Economic Council Director Lael Brainard said in December, days after the deal was announced, that the administration had concerns. The deal “appears to deserve serious scrutiny in terms of its potential impact on national security and supply chain reliability,” she said at the time.
Members of Congress in both parties have also raised national security concerns, including because of the Japanese steelmaker’s exposure to China. And Trump has said that he would block Nippon’s takeover “instantaneously.”
Biden has staunchly supported labor unions throughout his presidency and is seeking the support of the unions and their members in his election rematch with Trump.
US Steel said in a government filing this week that it will hold a special shareholder meeting over the deal on April 12.
After a meeting with Nippon Steel last week, the union said the discussion yielded no progress and ended in less than an hour. Nippon said in a statement at the time that it addressed the USW’s concerns about capital investment, job security and technology sharing.
--With assistance from Shoko Oda, Andrew Janes and Momoka Yokoyama.
(Updates with Japanese government spokesman declining to comment in 14th paragraph.)
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