Nippon Steel and U.S. Steel have initiated a federal lawsuit on Monday in response to the Biden administration’s decision to block Nippon’s $15 billion acquisition of the Pittsburgh-based company. The lawsuit alleges that the head of the Steelworkers union and a competitor, Cleveland-Cliffs Inc., collaborated to undermine the merger.
In his decision to block the deal, President Biden emphasized the necessity for U.S. steel producers to maintain leadership in safeguarding the nation’s interests, despite Japan being a key ally. According to the two steel companies, the decision to halt the acquisition was politically motivated, lacking any sound legal justification.
In statements released, Nippon Steel and U.S. Steel argued they had engaged in discussions to demonstrate how the merger would bolster U.S. national security rather than compromise it. Nippon Steel had committed to investing $2.7 billion to upgrade U.S. Steel’s outdated blast furnace operations in Gary, Indiana, and the Mon Valley in Pennsylvania, asserting its capability to strengthen American competitiveness in a market increasingly influenced by China.
Without the financial aid from Nippon Steel, U.S. Steel has warned of plans to transition away from traditional blast furnaces in favor of more cost-effective non-union electric arc furnaces, in addition to relocating its headquarters out of Pittsburgh.
Last Friday, President Biden announced the suspension of the merger after regulatory bodies, including the Committee on Foreign Investment in the United States (CFIUS), failed to reach a consensus on the potential national security implications of the deal, arguing that having a robust domestically owned steel sector is crucial for national security.
While administration representatives maintain that the decision did not relate to the Japan-U.S. relationship, it marks the first instance in which a U.S. president has intervened to block a merger involving an American and a Japanese firm. With President Biden nearing the end of his term, this decision follows a deadlock by CFIUS on assessing national security risks in the previous month.
Robyn Patterson, a spokesperson for the White House, defended the decision by indicating that national security and trade experts identified risks associated with the acquisition. “President Biden will never hesitate to protect the security of this nation, its infrastructure, and the resilience of its supply chains,” Patterson noted.
In another suit filed in Pennsylvania, Nippon Steel and U.S. Steel targeted Cleveland-Cliffs and its CEO, Lourenco Goncalves, accusing them, along with David McCall of the Steelworkers union, of participating in a coordinated scheme to block the merger. Prior to agreeing to Nippon’s offer, Cleveland-Cliffs made a $7 billion bid for U.S. Steel, which was ultimately rejected.
The lawsuit claims Goncalves collaborated with McCall to manipulate the acquisition process in favor of Cleveland-Cliffs, impairing U.S. Steel’s competitive viability. McCall has dismissed these allegations as unfounded and maintained that blocking the acquisition was in the best interest of U.S. national security.
McCall has long scrutinized Nippon Steel’s role as a fair player within international trade, labeling the company a “serial trade cheater” for allegedly undermining the domestic steel market through dumping practices.
Cleveland-Cliffs, based in Ohio, has not responded to requests for comments on the matter. The lawsuit also contends that CFIUS was directed not to pursue alternative proposals or engage in negotiations concerning the acquisition, leading to accusations of political maneuvering that favored a predetermined conclusion.
Looking ahead, Nippon Steel is poised to face an incoming administration that is also committed to obstructing the acquisition. President-elect Donald Trump has communicated that he intends to reject the deal and emphasized his plans to utilize tariffs and tax incentives to empower U.S. Steel.
Shortly after the lawsuits emerged, Trump reiterated his stance on social media, questioning why U.S. Steel would consider a sale when tariffs could enhance its profitability. His post hinted at revitalizing U.S. Steel’s historic status as a leading company in the sector.
As the news unfolded, shares of United States Steel Corp. experienced a rise of over 3% at the market’s opening on Monday.
