Biden says US Steel must stay domestically owned, a major blow to Nippon Steel

US Steel, which has agreed to be bought by Japan's Nippon Steel for $14.9bn (R279.75bn), must remain a domestically owned American firm, President Joe Biden said — expressing explicit opposition to the deal for the first time.

“US Steel has been an iconic American steel company for more than a century, and it is vital for it to remain an American steel company that is domestically owned and operated,” the president said in a statement.

It was, however, not immediately clear whether Biden would use any US regulatory authorities to scuttle the deal. The committee on foreign investment in the US (CFIUS), a powerful panel that reviews foreign investments in US companies, has the power to recommend the deal be blocked on national security grounds.

The White House said in December the proposed acquisition deserved “serious scrutiny” given US Steel's core role in steel production that is critical to national security.

Nippon Steel said in a statement on Thursday the acquisition would deliver “clear benefits to US Steel, union workers, the broader American steel industry, and American national security”.

“We are progressing through the regulatory review, including CFIUS, while trusting the rule-of-law, objectivity, and due process we expect from the US government. We are determined to see this through and complete the transaction,” it said.

The Japanese firm also said in an initial statement there would be no layoffs and no plant closures until September 2026 under certain conditions but later reissued its statement to say there would be no layoffs or plant closures as a result of the transaction.

Shares of US Steel sank again on Thursday and have tumbled 18% over two days to $38.26 on concerns Biden would express his opposition. That's far below the proposed deal price of $55 per share. The company was not immediately available for comment.

Separately, Cleveland-Cliffs CEO Lourenco Goncalves said on Thursday he would consider another bid for US Steel likely worth no more than $30 per share if the deal with Nippon Steel falls apart.

Cleveland-Cliffs was among the bidders for US Steel.

US opposition to the deal has the potential to overshadow an April 10 summit between Biden and Japanese Prime Minister Fumio Kishida aimed at boosting the long-standing security alliance between their countries in the face of growing Chinese influence.

Biden, who is running for re-election this year and has courted unions as a key constituent of political support, also called United Steelworkers International president David McCall on Thursday. He reiterated he has the “steelworkers' back”, the White House said.

McCall said Biden's statements should end debate about the deal.

“Allowing one of our nation's largest steel manufacturers to be purchased by a foreign-owned corporation leaves us vulnerable when it comes to meeting both our defence and critical infrastructure needs,” he said.

CFIUS has met with the parties to discuss the deal, a person familiar with the matter said.

The Treasury department, which leads CFIUS, did not immediately respond to a request for comment, and the White House declined to comment on whether Biden planned to use its powers to block the deal.

According to a January filing, Nippon Steel has committed to undertaking “all actions required” to obtain CFIUS clearance and to pay US Steel a $565m (R10.6bn) break-up fee if it fails to do so.

Art Hogan, chief market strategist at B Riley Wealth in New York, said there were always complications when foreign companies look to buy .US-based corporations but Nippon Steel had an uphill battle in particular due to timing.

“In an election year, it will be a heavy lift to get all the stakeholders comfortable with the acquisition of a US manufacturing icon,” Hogan added.

Reuters