The Trump Administration has ordered a new national security review for the Nippon Steel Corporation’s proposed acquisition of U.S. Steel, signaling the potential for the $14.9 billion deal to go through. The order comes as shares of U.S. Steel hit a 52-week high, a spike of more than 16% ($44.49 per share) in reaction to the original merger decision.
Former President Joe Biden had blocked the merger deal just before leaving office, citing potential threats to critical supply chains posed by one of the largest steel producers in the U.S. coming under a foreign merger. Months of scrutiny by U.S. antitrust authorities and a deadlocked Committee on Foreign Investment in the United States (CFIUS) over the potential for national security risks forced Biden to make a decision himself, without a recommendation issued.
Trump also opposed the deal but appeared to soften his position in February after a meeting with Japanese Prime Minister Shigeru Ishiba. Late on Monday, April 7, he ordered the CFIUS to review the transaction “to assist me in determining whether further action in this matter may be appropriate.”
According to a memorandum issued that Monday, CFIUS’s review “shall be conducted de novo, confidentially, and consistent with the procedures set forth for national security reviews… including, but not limited to, identifying potential national security risks associated with the proposed transaction and providing adequate opportunity to the parties to respond to such concerns.” Within 45 days of the memorandum, CFIUS will submit a recommendation to Trump with suggestions for further action.
The Pittsburgh-based US Steel, founded by JP Morgan in 1901 as a merger of several other steel companies, and Nippon Steel filed lawsuits against the Biden Administration in January challenging the presidential block, alleging that it was a political decision which violated the companies’ due process. The lawsuit claimed that Biden’s decision was motivated and aided by U.S. Steel rival Cleveland-Cliffs and the United Steelworkers union, which had pledged its exclusive approval for Cliffs’ efforts to buy U.S. Steel.
This currently issued memorandum coincides with the deadline for the U.S. government to file a response to the Biden Administration CFIUS review. Last month, the federal government asked for a delay in order to “allow the government to complete its ongoing discussions… regarding the U.S. Steel and Nippon Steel transaction with the goal of eliminating the need for this Court’s resolution of the litigation on the merits,” with a judge approving.
U.S. Steel thanked Trump in a statement, saying that his move “validates our Board’s bold decision to challenge President Biden’s unlawful order,” adding that Trump’s decision “is pivotal as we work to deliver on new and historic levels of investment in American steelmaking.”
According to Bloomberg News, U.S. Commerce Secretary Howard Lutnick, now a member of CFIUS, met with Nippon Steel’s Vice Chairman Takahiro Mori in recent days, with the Japanese company reportedly offering to increase its investment from the original $2.7 billion pledged to $7 billion.
Lutnick was also reported to have met with Ancora Holdings Group, a private wealth and asset advisory group with a minority stake in US Steel, which launched a proxy challenge aiming to remove U.S. Steel’s CEO David Burritt and place nine new members on the company’s board of directors. Less than a month ago, Ancora said in a letter to shareholders that the sale was dead in the water with “no chance of being resurrected,” and demanded an immediate termination of the merger agreement. However, in a letter to U.S. Steel’s shareholders sent on Monday, Ancora wrote “the Company’s securities filings and other public reports about increasing capital investments indicate that the prospects for the transaction have significantly improved.” Now, Ancora has reversed its stance and said that it is committed to seeing the deal close once and for all.
Ancora’s letter follows a Trump news conference with Japanese Prime Minister Shigeru Ishiba which broke news that Nippon would heavily invest in US Steel rather than outright buying it.
“I don’t want it purchased,” Trump said. “But I love investments. And they’re going to do a big investment subject to getting the deal done.”
Ishiba also emphasized that the deal would be mutually beneficial for all parties involved.
