US Steel, Nippon sue Biden administration over decision to block merger | business and economy news
Nippon Steel and US Steel have filed a federal lawsuit in the United States, challenging the Biden administration’s decision to block Nippon’s proposed $15bn acquisition of the Pittsburgh company. The companies say the head of the United Steelworkers union and a rival steelmaker worked together to thwart the purchase.
The lawsuit filed on Monday alleges that US President Joe Biden biased the decisions of the Committee on Foreign Investment in the US (CFIUS), which screens foreign investments for national security risks and impartially reviews companies. rights have been violated.
Moving to block the transaction on Friday, Biden said US companies that produce large amounts of steel need to “continue leading the fight on behalf of America’s national interests”, even as Japan, where Nippon is a strong ally. This is the first time that a US President has blocked a merger between an American and Japanese company.
In separate lawsuits filed in the US Court of Appeals for the District of Columbia and the US District Court for the Western District of Pennsylvania, steelmakers alleged that this was a political decision taken by the Biden administration that had no rational legal basis.
“Nippon Steel and U.S. Steel have worked in good faith with all parties to outline how the transaction will advance, and not threaten, the national security of the United States,” the companies said in a prepared statement Monday.
Nippon Steel pledged to invest $2.7 billion in US Steel’s former blast furnace operations in Gary, Indiana, and Mon Valley, Pennsylvania, saying it would help the US compete in an industry dominated by the Chinese. Is in the best condition for.
US Steel has warned that, without Nippon Steel’s cash, it will shift production from blast furnaces to cheaper non-union electric arc furnaces and move its headquarters out of Pittsburgh.
In a separate lawsuit filed in the District Court for the Western District of Pennsylvania, the companies accused steelmaking rival Cleveland-Cliffs Inc. and its CEO Lourenco Goncalves of coordinating with United Steelworkers (USW) union head David McCall. , “engaging in a coordinated series of anti-competitive and fraudulent activities” to block the deal. McCall on Monday called the allegations baseless.
In 2023, before US Steel accepted Nippon’s buyout offer, Cleveland-Cliffs offered to buy US Steel for $7 billion. US Steel rejected the offer and later accepted Nippon Steel’s all-cash offer, which has now been cancelled.
The merger was politicized
The merger had become highly politicized ahead of the November US presidential election, with both Democrat Biden and Republican President-elect Donald Trump promising to end it as they wooed voters in the swing state of Pennsylvania, where US Steel is headquartered. Is. USW President McCall opposed the alliance.
Both Trump and Biden insisted that the company should remain American-owned even after the Japanese company offered to move its US headquarters to Pittsburgh, where the US steelmaker is based, and between US Steel and the USW Promised to honor all agreements.
The companies allege that Biden tried to kill the deal in order to “favor the USW leadership in Pennsylvania in his bid for re-election.”
“As a result of President Biden’s undue influence to advance his political agenda, the Committee on Foreign Investment in the United States failed to conduct a good faith, national security-focused regulatory review process,” the companies said in a statement announcing the lawsuit. Failed.”
A White House spokesperson said, “A committee of national security and trade experts has determined that this acquisition poses a risk to U.S. national security. President Biden will continue to protect the security of this nation, its infrastructure, and the resiliency of its supply chains.” Will never hesitate to protect.
The prospects for the lawsuit, which also involves Attorney General Merrick Garland and Treasury Secretary Janet Yellen, who oversees CFIUS, are unclear. Experts say courts generally give CFIUS great deference in defining national security.
The US Justice Department declined to comment, and the Treasury Department did not respond to a request for comment from the Reuters news agency.
Trump asked in a post on his social media platforms, “Why would they want to sell US steel now when the tariffs would make it a more profitable and valuable company?”
Trump has promised to impose tariffs on imports from all countries.
US Steel, founded in 1901 by some of the largest American tycoons, including Andrew Carnegie, JPMorgan and Charles Schwab, became involved with the country’s industrial recovery after the Great Depression and World War II.
The company is under pressure after several quarters of declining revenue and profit, making it an attractive acquisition target for rivals looking to expand their US market share.
‘Manipulation’ Review
Nippon Steel’s December 2023 bid for US steel faced headwinds from the start.
The companies said Biden came out against the deal even before the CFIUS review began on March 14, prejudicing the outcome and denying the companies due process guaranteed by both the Constitution and CFIUS rules.
McCall endorsed Biden a week later. Biden was later replaced on the ticket by Vice President Kamala Harris, who had also opposed the deal and was endorsed by the USW.
After review, CFIUS usually approves a deal, or recommends the President block it. In rare cases, when the agencies that make up CFIUS can’t agree, they can refer the matter to the president, as they did with the Nippon Steel deal on Dec. 23, setting the stage for Biden’s obstruction. Happened.
The statement alleges that previously, CFIUS staff had been barred from negotiating with companies on proposed agreements to address the committee’s national security concerns, a clear deviation from normal practice.
“It is clear that the review process was being manipulated so that its results would support President Biden’s predetermined decision,” the companies said. “This cannot and is not the due process to which parties before CFIUS are entitled.”
