It’s open war between Nippon Steel and the US Government, due to interference with the proposed merger with US Steel. A backlash from the outgoing President Joe Bidenwhich cited national security reasons for block the sale of the American company to its Japanese competitor. An operation worth almost 15 billion dollars which would have led to the birth of the third largest steel producer globally, the Chinese Baowu Steel and the Franco-Dutch ArcelorMittal.
Two lawsuits against the government
Nippon Steel and US Steel have formally announced that they have filed two lawsuits against the US government – one in the district court of Columbia and one in the Pennsylvania court – vs illicit interference and political influence exercised illegally by President Biden on the aggregation project, which last month had also received the green light from CFIUS, the Committee for Foreign Investment in the United States, which had failed to demonstrate the existence of threats to national security.
“From the beginning of the process – it is explained – Nippon Steel and US Steel have committed to all stakeholders to ensure that the operation does not pose a threat to U.S. national security and strengthen the U.S. steel industry and supply chains against the Chinese threat.”
This is why Nippon Steel was committed to make investments and protect employment and the territories in which US Steel operates (Pennsylvania and Indiana) and the entire American steel industry from Chinese competition.
The acquisition operation
The long-announced operation involves the acquisition of the entire capital of US Steel by Nippon Steel for a total of $14.9 billion in cashequal to $55 per share US Steel listed on the NYSE. To finance the transaction, which would create the world’s third largest steel producer, the Japanese company is evaluating various options, including a capital increase.
In response to the purchase, Nippon Steel has committed to making investments: at least $1 billion in Mon Valley Works and approximately $300 million in Gary Works as part of the $2.7 billion in planned investments.
Because Biden blocked the operation
Although the operation has been in the pipeline for some time, in the first days of the year, the President Joe Biden announced he would block the transactionciting reasons of “national security”. “We need large U.S. companies, which represent much of the steel capacity of the United States, to carry on the fight on behalf of America’s national interests,” Biden said without referring to specific elements that demonstrate the concrete threat.
Biden’s could be the last final blow before the passing of the baton to President-elect Donald Trump on January 20th. From that date, any pending business will pass to the new Administration.
The opinion of the experts
The damage caused by the failed merger could be quantified in one penalty of 565 million dollars against Nippon Steelfor a total breakdown of the preliminary agreements and in one failure to produce 20 million tonnes of steelwhich would be added by US Steel to Nippon Steel’s overall production of 85 million tons per year, close to its long-term target of 100 million tons.
Despite this, experts do not believe that stopping the operation would cause serious damage to the Japanese company, whose earnings prospects remain intact for the 2025/2026 financial year.
