With Nippon Deal Blocked, What’s Next for US Steel? | Global News Avenue

U.S. President Joe Biden on Friday blocked Japanese steel giant New Japan Corp.’s $14 billion acquisition of U.S. Steel (X), casting the storied steelmaker’s prospects into question.

U.S. Steel Corp.’s Nippon Steel Corp. deal hits headwinds as it leaps forward Politicians from both parties quickly came out against the cooperation, claiming it would threaten national security and undermine U.S. trade protections. Some are also skeptical that Japanese steel can protect American jobs, concerns shared by the United Steelworkers union, which also opposes the deal.

The takeover seemed destined to fail because Committee on Foreign Investment in the United States (CFIUS) It failed to reach consensus late last month on the security risks of the deal, passing the decision to Biden, who has repeatedly expressed opposition.

Can U.S. Steel challenge Biden’s decision?

After the White House decision, one option for U.S. Steel was to sue Japanese steel companies for failing to sway regulators. That’s the path of grocery chain Albertsons selected last month Its $25 billion merger with rival Kroger has been blocked in federal court. However, a joint statement from the two companies suggests this is unlikely to happen.

U.S. Steel and Nippon Steel said on Friday they would continue to pursue acquisitions. “We continue to believe that cooperation between Nippon Steel and U.S. Steel is the best way to ensure that U.S. Steel…can compete and thrive in the future – and we will…take all appropriate actions to protect our legal rights and securing the future,” the companies said. They vowed to “deliver the agreed-upon value of $55.00 per share to U.S. Steel shareholders upon closing of the transaction.”

The companies can challenge the decision on the grounds that the White House and the Committee on Foreign Investment in the United States circumvented standard procedures. The companies claimed on Friday that regulators “did not properly consider their single mitigation proposal.” They said the review process was “deeply corrupted by politics and the outcome was predetermined”.

U.S. Steel has other interested buyers

If the companies fail to convince the court that the review process was flawed, U.S. Steel would be entitled to $565 million in damages from Nippon for failing to close the deal. That amount, while large, may not be enough to solve the problems that forced U.S. Steel to sell itself.

Domestic rivals Cleveland Cliffs (CLF) proposed an acquisition of U.S. Steel in 2023, but gave up only after announcing the deal with Japan Steel in December of that year. Resuming such domestic cooperation would face far less resistance in Washington and would likely draw support from the United Steelworkers, which approved Cleveland-Cliffs’ original proposal.

cleveland cliffs CEO Lourenco Goncalves said he remains interested in U.S. Steel, but there is no guarantee the company will make a second takeover bid as it recently completed its nearly $3 billion acquisition of Canadian steelmaker Stelco.

Instead, the company could be partially sold, said steel analyst Josh Spores. “It’s hard to see any steel entities as they buy all the U.S. Steel companies today,” Spurs told Bloomberg September.