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Nippon Steel and US Steel filed two lawsuits in the US alleging “unlawful interference” after a proposed $15 billion combination between the steelmakers was blocked by President Joe Biden just days earlier.
In a statement Monday, the companies said the first suit was sought Bidenthe decision to be annulled due to “illegal political interference” in the process.
A second lawsuit was filed against rival steelmaker Cleveland-Cliffs, its CEO Lorenzo Goncalves and United Steelworkers President David McCall, alleging “unlawful and coordinated actions aimed at preventing the transaction.”
“Today’s legal proceedings demonstrate the continued commitment of Nippon Steel and US Steel to complete the transaction,” the companies said in a statement.
The legal claims mark the latest twist in a takeover saga that has put U.S.-Japan relations under considerable strain, heralded new hostility in the U.S. investment climate and called into question the independence of the U.S. national security investment vetting mechanism.
All right issued on Friday blocking the deal, Biden said there was “credible evidence” that Nippon’s purchase could take steps that would harm US security.
Through lawsuits, Nippon and US Steel aim to find that Biden “ignored the rule of law” to curry favor with unions and support his political agenda and that the Committee on Foreign Investment in the US (Cfius), which vets foreign buyers of US companies, failed to conduct a review in good faith.
The Cfius process was supposed to achieve a “predetermined result” after Biden voiced his opposition to the transaction in March, before any security review was conducted, the companies added.
They also wanted to show that US competitor Cleveland-Cliffs sought to prevent any other buyer from buying US Steel as “part of a wider illegal campaign to monopolize domestic steel markets”.
Cleveland-Cliffs, a competing American steelmaker, did unsolicited offer to buy US Steel in July 2023, after which a wider auction was held in which Nippon came out on top.
USW’s McCall said Monday: “By blocking Nippon Steel’s attempt to buy US Steel, the Biden administration protected vital US interests, preserved our national security and helped preserve the domestic steel industry that underpins our nation’s critical supply chains.” He added that the union is “reviewing the complaint and will vigorously defend itself against these baseless allegations.”
Cleveland-Cliffs did not immediately respond to a request for comment.
The legal action came after Biden vetoed the deal in light of Cfius failing to reach a consensus on whether the deal posed a threat to national security.
Nippon has gone to great lengths to address these issues, pledging to invest $2.7 billion in plant modernization and guaranteeing that there will be no reductions in production capacity at most sites for 10 years without US government approval.
Biden’s decision to abandon Nippon’s takeover of America’s legendary rival threatens to cause turmoil in alliances and business relations with America’s most important partner in East Asia and its biggest foreign investor.
Japanese Prime Minister Shigeru Ishiba warned at a news conference on Monday that the US must explain more clearly why there are security problems and said its obstruction sent a chilling message to would-be Japanese investors in the US.
“It is unfortunate that voices of concern are being raised within the Japanese industrial sector about future investment in the US,” he said. “We cannot help but take these concerns seriously, and we strongly encourage the US government to address these concerns.”
US presidents have vetoed eight other takeover deals under Cfius review since 1990, according to the Congressional Research Service, but none by Japanese companies until last week.
There is precedent for the US government being embroiled in a legal battle after the president blocked a takeover deal.
In 2015, Chinese-owned Ralls won a settlement after it claimed the US government violated due process when it was ordered to divest four wind farms near a military base in Oregon following a Cfius review.
