Biden blocks $14.9 billion US Steel sale to Nippon Steel
2024-09-05 14:54- The Biden administration plans to block the $14.9 billion sale of US Steel to Nippon Steel, causing US Steel's shares to drop over 20%.
- US Steel's CEO warned that blocking the merger could lead to job losses and the closure of steel mills, particularly affecting Pennsylvania.
- Bipartisan opposition to the deal highlights concerns over foreign ownership, with significant implications for the upcoming presidential election.
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Insights
The Biden administration is set to block the proposed acquisition of US Steel by Nippon Steel, a move that has sparked significant concern from US Steel's CEO, David Burritt. He warned that halting the merger could lead to the closure of steel mills and the relocation of the company's headquarters from Pittsburgh, a critical area for the upcoming presidential election. The announcement has already caused US Steel's shares to drop by over 20%. Bipartisan opposition to the deal has emerged, with both President Biden and Vice President Kamala Harris expressing their desire for US Steel to remain American-owned. Harris emphasized the importance of protecting union jobs, while former President Donald Trump has also pledged to block the acquisition if he returns to office. This political climate is particularly relevant as both Harris and Trump are actively courting Pennsylvania voters. US Steel has been banking on a $3 billion investment from Nippon as part of the nearly $15 billion deal, which Burritt claims is essential for the company’s survival. Without the merger, he indicated that thousands of union jobs would be at risk, and the company would pivot away from its blast furnace facilities, negatively impacting local communities. Nippon Steel has attempted to alleviate concerns by promising to appoint a board with a majority of US citizens and committing to refrain from layoffs through 2026. Despite these assurances, the opposition remains strong, with pro-business groups warning that blocking the deal could deter foreign investment in US companies.
Contexts
On December 18, 2023, Nippon Steel announced a $14.1 billion deal to acquire U.S. Steel, which includes a commitment to invest $2.4 billion in upgrades. This acquisition is seen as crucial for preserving jobs and enhancing manufacturing capabilities in the U.S., especially as U.S. Steel has been financially struggling. However, President Biden is preparing to block this acquisition, citing national security concerns and bipartisan opposition from political leaders and labor unions, particularly in Pennsylvania. The United Steel Workers union has expressed skepticism regarding job security promises made by Nippon Steel, complicating the merger's prospects. U.S. Steel's CEO, David Burritt, has warned that blocking the sale could lead to plant closures and a potential relocation of the company's headquarters from Pittsburgh. The situation is further complicated by a 19% drop in U.S. Steel's stock, reflecting the merger's impact on the market. Concerns are also rising in Japan over the potential decision to block the merger, as Japanese officials fear it could damage U.S.-Japan relations and portray Japan as a threat, particularly amid ongoing U.S. pressure regarding technology exports to China.
