- M&A
- January 3, 2025
- 3 minutes read
President Joe Biden Blocks Nippon’s U.S. Steel Takeover
U.S. President Joe Biden has blocked a bid by Nippon Steel (TYO: 5401), a Japanese company, to acquire U.S. Steel…
U.S. President Joe Biden has blocked a bid by Nippon Steel (TYO: 5401), a Japanese company, to acquire U.S. Steel (NYSE: X), a top domestic steel producer. Biden blocked the bid on national security grounds, asserting that foreign ownership of a sensitive industry isn’t favorable to U.S. national security interests.
Nippon Steel announced its $15bn bid for U.S. Steel in December 2023. The deal immediately faced political headwinds, with Biden vowing to block the purchase of one of America’s most famous corporations.
- U.S. Steel once accounted for most of America’s steel output and was the first U.S. company to reach a $1bn market capitalization. Tough domestic and foreign competition has dented its fortunes; U.S. Steel’s market value is barely higher than in the 2000s, with a stagnating business caused by cheaper steel production abroad.
- Yet, U.S. Steel remains a top-five domestic steel producer and a politically sensitive company.
The Committee on Foreign Investment in the United States (CFIUS) spent months reviewing Nippon Steel’s proposed takeover but failed to reach a consensus. In December, the agency referred its decision to President Biden.
Nippon offered a whopping 142% premium over U.S. Steel’s market value and lobbied significantly to convince the U.S. President’s office to approve the deal. In November, Japanese Prime Minister Shigeru Ishiba penned a letter urging Biden to approve the takeover. Japan is a key economic and military ally of the U.S.
Nippon Steel reportedly made a last-ditch concession offering the U.S. government legal power to prevent any future reductions in U.S. Steel’s production. However, that apparently wasn’t enough to convince Biden to approve the deal.
President-elect Donald Trump, who assumes office on January 20, 2025, also vowed to block the takeover during his campaign trail. Hence, Nippon Steel has few options but to abandon the deal. It previously agreed to pay a $565mn penalty to U.S. Steel if the deal collapsed.
- Acquiring U.S. Steel would have made Nippon Steel the world’s second-largest steel producer with factories across the globe.
- With tough competition and a stagnated business, U.S. Steel needs considerable investment to raise its production output. Nippon Steel offered large-scale investment, but with its deal blocked, U.S. Steel will need an alternative. It previously rejected a takeover offer from American steel producer Cleveland-Cliffs.
