Japan's steel company sues the US government after Biden blocked a $14.9 billion acquisition

US President Joe Biden decided to block the Japanese steelmaker NSSMC's planned acquisition of US Steel Corporation, saying that "foreign ownership of U.S steelmakers poses risks to our national security and critical supply chains."

NSSMC and US Steel to take "appropriate action" to defend legitimate rights and interests after White House decision.

"Unbelievable that the U.S. government would treat an America's close ally like Japan this way."

On the morning of January 4, local time, Japanese Steelmaker Nippon Steel & Sumitomo Metal Corporation (NSSMC) decided to sue the US government after US President Joe Biden invoked national security to block its planned takeover of US Steel on January 3.

NSSMC announced its plans to acquire US Steel in December 2023. However, the deal was vehemently opposed by both the United Steelworkers union and elected officials from both parties. The Committee on Foreign Investment in the United States (CFIUS) reviewed the proposed deal for national security reasons for months, but reached no agreement before the December 23 deadline and left the decision to President Biden. American media believe that Biden has taken the responsibility of blocking the deal before stepping down, allowing President Trump, who publicly opposed the acquisition, to deal with it. The issue is "too divisive."

US Steel said it would be forced to lay off workers and close factories if the sale isn't completed. In recent years, US Steel has fallen significantly behind its US rivals in terms of output and stock price.

US Steel, founded in 1901 and headquartered in Pittsburgh, Pennsylvania, played a key role in America's industrial development in the 20th century. It is one of the country's traditional mainstays, providing the steel used to build America's bridges and buildings, as well as the U.S. Navy's vast fleet during World War II.

But over the past few decades, US Steel has been steadily losing money, falling far behind many of its US rivals in terms of steel output and stock market capitalization. It has since resorted to selling itself.

In December 2023, NSSMC announced that it plans to buy US Steel for $55 per unit in cash, and turn it into a wholly owned subsidiary. The total deal was valued at about $14.9 billion, as reported.

In April 2024, US Steel's shareholders overwhelmingly approved the company's plan to be taken over by NSSMC, with the plan receiving over 98% support at an extraordinary general meeting.

Now, Biden's decision represents a death blow. "This is a shocking and deeply distressing development to be told that the administration is preventing foreign ownership of a U.S company and yet doing it to an ally as close and longstanding as Japan. Unfortunately it also sends a chilling message to any American ally company that may be considering a major investment in the U.S."

Biden's decision comes despite the fact that NSSMC had already agreed to all of the US government's conditions and had agreed to give US authorities veto power over any change in NSSMC's U.S. production quotas. "Unbelievable," said Chester Spatt, professor of finance at Carnegie Mellon University in Pittsburgh.

NSSMC and US Steel both issued statements on Tuesday stating that they intend to "take whatever appropriate action, including legal action, is available" to protect their "legitimate rights and interest." The companies said that "the president's statement and order do include no credible evidence of national security concerns, which clearly indicates this decision was political. "

"America's national security is at stake," Biden said in a statement justifying his decision, calling the proposed acquisition a "threat."

Biden's decision comes after he had told US steelworkers more than six months ago that he would support them. "We've got to make sure we make things in America again," he said during a visit to Steel Dynamics' manufacturing facility in Butler, Pennsylvania.

A day earlier, outgoing Trump ally Nikki Haley also warned that NSSMC's acquisition would pose a security threat. "It's very hard, actually impossible to argue that China, a bad actor in steel and in world trade, won't rejoice in this development," Haley, the former US ambassador to China and UN ambassador, said on Fox News. "China loves to see American companies fail. That means we're weaker and they can export steel to the U.S. with no competition."

Now, NSSMC could be forced to pay US Steel a $565 million break-up fee. And the company said on Tuesday that it will reconsider "how we will pursue our overseas expansion growth strategy."

The announcement of a settlement of NSSMC's acquisition of U.S. Steel has already triggered a global price increase in the steel industry, which has struggled in recent years amid geopolitical tensions and lower demand.