US Steel, Nippon sue Biden administration over decision to block merger | Business and economic news
Nippon Steel and US Steel have filed a federal lawsuit in the United States challenging the Biden administration’s decision to block Nippon’s proposed $15 billion acquisition of the Pittsburgh company. The companies say the head of the United Steelworkers union and a rival steelmaker worked together to prevent a buyout.
The lawsuit, filed on Monday, states that US President Joe Biden prejudiced the decision of the Committee on Foreign Investment in the USA (CFIUS), which scrutinizes foreign investments due to risks to national security, and violated the companies’ right to a fair audit.
In an attempt to block the transaction on Friday, Biden said that American companies that produce large amounts of steel must “continue to fight on behalf of American national interests,” even though Japan, where Nippon is based, is a strong ally. This is the first time that a US president has blocked a merger between an American and a Japanese company.
In separate lawsuits filed in the U.S. Court of Appeals for the District of Columbia and the U.S. District Court for the Western District of Pennsylvania, the steelmakers argue that it was a political decision by the Biden administration that had no rational legal basis.
“Nippon Steel and US Steel have engaged in good faith with all parties to emphasize how the transaction will enhance, not threaten, the national security of the United States,” the companies said in a prepared statement Monday.
Nippon Steel has pledged to invest $2.7 billion in US Steel’s aging blast furnace operations in Gary, Indiana, and Mon Valley, Pennsylvania, and said it is best positioned to help the U.S. compete in an industry it dominates. The Chinese.
US Steel has warned that, without Nippon Steel’s cash, it will shift production from blast furnaces to cheaper non-union electric arc furnaces and move its headquarters from Pittsburgh.
In a separate lawsuit filed in the District Court for the Western District of Pennsylvania, the companies accused steel rival Cleveland-Cliffs Inc and its CEO Lourenco Goncalves, along with David McCall, head of the United Steelworkers (USW) union. , about “engaging in a coordinated series of anti-competitive and anti-racketeering activities” to block the deal. On Monday, McCall called the allegations baseless.
In 2023, before US Steel accepted Nippon’s buyout offer, Cleveland-Cliffs made a $7 billion bid for US Steel. US Steel rejected the offer and later accepted Nippon Steel’s all-cash offer which has now been rescinded.
A politicized merger
The merger has become highly politicized ahead of November’s US presidential election, with Democrat Biden and Republican President Donald Trump vowing to end it while courting voters in the swing state of Pennsylvania, where US Steel is headquartered. USW President McCall opposed the merger.
Both Trump and Biden argued that the company should remain American-owned even after the Japanese company offered to move its US headquarters to Pittsburgh, where the US steelmaker is headquartered, and promised to honor all agreements between US Steel and of USW.
Biden sought to scuttle the deal in order “to curry favor with USW leadership in Pennsylvania in his re-election bid,” the companies claim.
“As a result of President Biden’s undue influence in promoting his political agenda, the Committee on Foreign Investment in the United States failed to conduct a good faith regulatory review process focused on national security,” the companies said in a statement announcing the lawsuit.
A White House spokesman said: “The Committee of Experts on National Security and Commerce concluded that this acquisition would create a risk to US national security. President Biden will never hesitate to protect the security of this nation, its infrastructure and the resilience of its supply chains.”
The outlook for the lawsuit, which also targets Attorney General Merrick Garland and Treasury Secretary Janet Yellen, who oversees CFIUS, is unclear. Courts generally give CFIUS great deference in defining national security, experts say.
The US Justice Department declined to comment, and the Treasury Department did not respond to Reuters’ request for comment.
In a post on his social media platform, Trump asked “Why would they want to sell US Steel now that the tariffs will make it a much more profitable and valuable company?”
Trump has promised to impose tariffs on imports across the board.
Founded in 1901 by some of America’s greatest magnates, including Andrew Carnegie, JP Morgan and Charles Schwab, US Steel became associated with the nation’s industrial recovery after the Great Depression and World War II.
The company is under pressure after several quarters of falling revenue and profits, making it an attractive takeover target for rivals looking to increase their share of the US market.
‘Manipulated’ review
Nippon Steel’s December 2023 bid for US Steel ran into problems from the start.
Biden spoke out against the deal on March 14, before the CFIUS review had even begun, prejudicing the outcome and denying the companies due process guaranteed by both the Constitution and CFIUS regulations, the companies said.
McCall endorsed Biden a week later. Biden was later replaced by Vice President Kamala Harris, who also opposed the deal and was supported by the USW.
After review, CFIUS typically approves the deal or recommends the president block it. In rare cases, when the agencies that make up CFIUS can’t agree, they can refer the matter to the president, as they did with the Nippon Steel deal on Dec. 23, setting the stage for a Biden block.
Previously, CFIUS staff had been barred from negotiating with companies on a proposed agreement to address the board’s national security concerns, the statement said, a significant departure from normal practice.
“It is clear that the review process was manipulated so that its outcome would support a predetermined decision by President Biden,” the companies said. “That cannot be and is not a legal proceeding to which parties before CFIUS are entitled.”
