US decision on Nippon bid for US Steel delayed until after election

The deal has become a hot political issue. This month, Vice President Kamala Harris, the Democratic presidential candidate, told a rally in Pennsylvania, the swing state where U.S. Steel is headquartered, that she wanted U.S. Steel to remain “American owned and operated,” echoing a view advocated by President Joe Biden. Photo: Bloomberg

4 minutes reading time Last updated: September 18, 2024 | 10:39 a.m. IST

The U.S. National Security Commission reviewing Nippon Steel’s $14.9 billion bid for U.S. Steel has allowed the two companies to refile their request for approval of the deal, a person familiar with the matter said, delaying a decision on the politically sensitive merger until after the Nov. 5 presidential election.

The move offers a glimmer of hope for the companies, whose proposed merger appeared to be on the verge of being blocked when the Committee on Foreign Investment in the United States (CFIUS) alleged on August 31 that the transaction posed a national security risk by threatening the steel supply chain for critical American industries.

CFIUS needs more time to understand the deal’s national security impact and engage with the parties, the person said Tuesday. The new filing opens a new 90-day window to review the proposed deal and make a decision.

The review is expected to take about 90 days, another person familiar with the matter said.

Nippon Steel declined to comment. CFIUS and U.S. Steel did not immediately respond to Reuters requests for comment.

“Extending the deadline takes some pressure off the parties and, importantly, pushes the decision beyond the November election,” said Nick Klein, CFIUS attorney at DLA Piper.

The deal has become a hot political issue. This month, Vice President Kamala Harris, the Democratic presidential candidate, told a rally in Pennsylvania, the swing state where U.S. Steel is headquartered, that she wanted U.S. Steel to remain “American-owned and operated,” echoing a view advocated by President Joe Biden.

The White House reiterated that position on Tuesday.

Harris’ Republican rival, Donald Trump, has pledged to block the deal if elected. Both candidates have sought to attract union votes.

The United Steelworkers Union, which vehemently opposes the deal, said Tuesday that “nothing has changed regarding the risks that the Nippon acquisition would pose to national security or the critical supply chain issues that have already been identified.”

CONCERNS OVER STEEL SUPPLY

CFIUS is concerned that the Nippon Steel merger could hurt the supply of steel needed for critical transportation, construction and agricultural projects, it said in its August letter to the companies, obtained exclusively by Reuters.

The company also cited the global glut of cheap Chinese steel and said that under Nippon, a Japanese company, U.S. Steel would be less likely to seek tariffs on foreign steel importers. It added that Nippon’s moves could “lead to a reduction in domestic steel production capacity.”

In a 100-page response letter to CFIUS, also obtained exclusively by Reuters, Nippon Steel said it would invest billions of dollars in U.S. Steel facilities that would otherwise sit idle, allowing it to “unquestionably” maintain and potentially increase domestic steelmaking capacity in the United States.”

The company also reaffirmed its commitment not to transfer any US Steel production capacity or jobs outside the United States and not to interfere in any of US Steel’s decisions on trade matters, including decisions to pursue trade actions under U.S. law.

law against unfair commercial practices.

The deal, Nippon added, “would create a stronger global competitor for China, based on the close relationship between the United States and Japan.”

CFIUS’s in-depth reviews take 90 days, but it is common for companies to withdraw their filings and resubmit them to give them more time to address the panel’s concerns.

According to CFIUS’ 2023 annual report, 18% of companies seeking approval for a deal refiled their applications last year. Nippon Steel and US Steel filed their requests for review in March, and CFIUS allowed them to refile in June, triggering a second 90-day deadline that expires on September 23, Reuters reported Friday.

In December, CFIUS could approve the deal, possibly with measures to address national security concerns, recommend that the president block it or extend the timeline again.

(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First published: September 18, 2024 | 10:39 a.m. IST