U.S. Steel Stocks Drop Following Biden's Plans to Block Nippon Steel Deal - Bloomberg
Shares of United States Steel Corp. fell significantly by over 11% following news that President Joe Biden would block the company's $14.1 billion sale to Nippon Steel Corp. due to national security concerns. According to Bloomberg, the findings of the Committee on Foreign Investment in the United States (CFIUS) are expected to be delivered to President Biden by the end of this month, potentially on December 22 or 23.
While the full extent of the CFIUS review is not publicly known, a referral to the president usually indicates that at least one of the panel members views the deal as a potential risk. Both Nippon Steel and US Steel have reported that they are prepared to initiate legal action should the merger be blocked by the president's decision.
The proposed acquisition has been under review for a significant portion of the year, and the White House and Treasury Department have declined to comment on the matter. However, US Steel spokesperson Amanda Malkowski argued that the deal should be approved based on its intrinsic value. Following the news, trading of US Steel shares was temporarily halted in New York after an initial decline of 8.8% due to volatility.
Nippon Steel emphasized the importance of the US-Japan alliance, stating its confidence in the American legal system and its willingness to collaborate with US Steel to achieve a fair outcome. The company's statement also criticized the role of politics in national security-related decisions.
The potential collapse of the merger has significant implications for US Steel; the company indicated that it might move its headquarters out of Pennsylvania and close some operations if the deal does not proceed.
President Biden, who hails from Pennsylvania, has previously expressed opposition to the sale, emphasizing that US Steel should remain under domestic ownership. Former President Donald Trump also pledged to block the transaction. The CFIUS process was extended in September, delaying the referral to December, raising doubts about the post-election expectations for the deal. Biden reaffirmed his position on September 27.
The United Steelworkers union, a strong player in the sector, opposed the sale. Vice President Kamala Harris supported Biden's stance during the presidential campaign.
It is unusual for acquisitions by companies from allied nations like Japan to be rejected by CFIUS. President Biden's decision is expected to be announced soon, after which there will be a 15-day period for a decision. Currently, further delays in the CFIUS review process are not anticipated; otherwise, the decision would be postponed to the next administration.