The fate of Nippon Steel’s $15 billion acquisition of U.S. Steel now rests with President Joe Biden, following a referral from the Committee on Foreign Investment in the United States (CFIUS). The deal, facing scrutiny over national security concerns, has encountered opposition from both Biden and President-elect Donald Trump. Biden has 15 days to block the merger or let it proceed.
National Security Concerns and CFIUS Involvement
CFIUS, which reviews foreign investments for potential national security risks, failed to reach a consensus on the proposed tie-up, prompting the referral to Biden. A letter from the committee, cited by The Washington Post, warned that the merger could result in reduced domestic steel production, posing a national security risk.
CFIUS raised concerns about the supply of steel for critical infrastructure projects, including transportation and agriculture, which could be impacted by foreign ownership. While Nippon Steel offered to mitigate these risks by appointing U.S. citizens to key management and board positions, the committee remained divided on whether these measures would suffice.
Biden’s Role and the Political Implications
The decision puts Biden in a politically sensitive position, with union workers and voters in swing states like Pennsylvania closely watching his next move. The president of the United Steelworkers Union has opposed the merger, further complicating the political dynamics.
Legal experts like Nick Wall, M&A partner at Allen & Overy, believe Biden’s decision is unpredictable. “The question is, what will Biden’s decision be? And I think that’s still very unpredictable,” Wall said.
If Biden takes no action within 15 days, the deal would proceed, granting Nippon Steel a significant foothold in the U.S. steel market.
High-Stakes Business and Potential Legal Fallout
For Nippon Steel, the acquisition is a strategic move to expand its global production capacity from 65 million metric tons to 85 million tons annually, with a long-term goal of surpassing 100 million tons. Analysts, including Ryunosuke Shibata from SBI Securities, describe U.S. Steel as a “once-in-a-lifetime opportunity” due to rising domestic steel demand and high U.S. steel prices.
If the deal collapses, Nippon Steel faces a $565 million penalty payable to U.S. Steel and has signaled potential legal action against the U.S. government.
Political Opposition and Long-Term Impact
The merger has faced bipartisan opposition, with both Biden and Trump voicing concerns over foreign control of a critical U.S. industry. Political motivations have played a role, as both leaders sought to appeal to union voters.
Earlier hopes for a calmer political climate after the November elections were dashed when CFIUS raised additional unresolved national security risks in a 29-page letter. Nippon Steel countered these claims, asserting that its investments as a company from an allied nation would strengthen U.S. Steel’s output.
What’s Next?
As Biden deliberates, the stakes remain high. Blocking the deal would align with national security concerns but could invite legal challenges from Nippon Steel. Approving the merger might address U.S. steel demand but could face backlash from unions and political opponents.
Whatever the outcome, this high-profile decision underscores the delicate balance between fostering foreign investment and protecting national security in a politically charged environment.