(Bloomberg) — Nippon Steel Corp. said it’s determined to complete its $14.1 billion acquisition of United States Steel Corp. after President Joe Biden said the company should stay in US hands.
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Japan’s largest steel company repeated its previous offer of an additional $1.4 billion in investment, and promised no layoffs or plant closures until at least September 2026, according to a statement on Friday.
While Biden stopped short of saying he would block the takeover, his comments on Thursday mark a rare presidential intervention in a transaction that outside an election year would have drawn less political scrutiny. Even as Nippon Steel doubles down on its bid for its iconic US rival, the risk is that opposition from the White House could prove insurmountable in getting the deal done.
The US also risks upsetting relations with a key ally. Japanese Prime Minister Fumio Kishida is due to hold a summit with Biden in Washington on April 10, where security cooperation will be on the agenda, but the US Steel issue is set to cloud the meeting.
In the wings is the possibility of another bid for US Steel from Cleveland-Cliffs Inc. Earlier on Thursday, Chief Executive Officer Lourenco Goncalves said he’d consider making an offer — with union support — albeit at a significantly lower price than Nippon Steel’s offer. US Steel rejected an earlier bid from Cleveland-Cliffs.
Storied History
Nippon Steel’s shares rose slightly in Tokyo after its statement.
But a plunge in US Steel’s shares shows that investors are increasingly concerned about the future of the Japanese deal. The stock slumped as much as 11% on Thursday to $36.38, but pared losses after Goncalves’ comments, closing at $38.26. Shares have dropped 18% in two days and are trading sharply below Nippon Steel’s offer of $55 per share.
Despite its storied history, US Steel’s role in the economy has diminished over several decades, a period during which producers in Asia have risen to dominate the global steel market. And while Nippon Steel’s proposed acquisition targets a historic business name, a takeover in the US commodities industry by a company based in a friendly country is hardly unusual.
Biden’s comments have also shone a fresh light on the influential position held by the United Steelworkers union and its leader, David McCall. Biden called McCall Thursday morning, reiterating that “he has the steelworkers’ back,” the White House said in a statement. For its part, the union welcomed Biden’s call for US Steel to remain domestically owned and operated, saying that the president’s comments should “end the debate,” according to a statement on Thursday.
Japan’s top government spokesman, Yoshimasa Hayashi, told a briefing on Friday that the government is aware of Biden’s statement on US Steel but won’t comment on the matter.
–With assistance from Ryotaro Nakamaru and Jon Herskovitz.
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