The Biden administration has indicated it will closely examine Nippon Steel’s proposed $6.7 billion acquisition of United States Steel Corp, one of America’s iconic manufacturers. The deal, announced last week, has sparked bipartisan pushback from lawmakers concerned over potential national security implications and the impact on U.S. jobs.
Overview of the Proposed Deal
On December 18th, Nippon Steel, Japan’s largest steelmaker, said it would acquire U.S. Steel in a deal worth approximately $6.7 billion. As part of the agreement, Nippon Steel will pay $29.81 per share and also assume U.S. Steel’s net debt obligations and pension liabilities, bringing the total value of the transaction to $14.1 billion.
If completed, the acquisition would represent one of the largest purchases ever of an American industrial manufacturer by a foreign company. It would also make Nippon Steel one of the top steel producers globally.
|Key Details of Nippon Steel’s Bid for U.S. Steel
|Total Value (including debt/liabilities)
|Price Per Share
|Nippon Steel (Japan)
White House Signals Scrutiny of Deal Over National Security Issues
The Biden administration has indicated it plans to closely review the transaction, including potential scrutiny by the Committee on Foreign Investment in the United States (CFIUS).
In a statement last Wednesday, National Economic Council director Brian Deese said:
“We believe that this deal deserves very close scrutiny to ensure that the sale would not undermine our national security or economic competitiveness.”
The CFIUS is an inter-agency committee authorized to review foreign acquisitions of U.S. firms for national security risks. While it very rarely moves to block deals, the CFIUS scrutiny often results in firms withdrawing proposals or making concessions to get transactions approved.
Concerns over U.S. Steel focus both on its production of steel for sensitive military applications as well as the overall health of America’s steel industry.
As the second largest U.S. steel producer, U.S. Steel accounts for approximately 20% of American flat-rolled steel capacity. It also operates mills that produce specialty steel used in applications like naval vessels.
Bipartisan Political Pushback Over Deal’s Impact on U.S. Jobs
In addition to national security issues, the proposed sale of the iconic 120-year old American steelmaker to a foreign entity has also sparked bipartisan political criticism.
Labor unions and lawmakers from both parties have voiced concerns over the deal’s implications for U.S. jobs and America’s manufacturing base.
The United Steelworkers union, which represents U.S. Steel employees, strongly opposes the acquisition. In a letter sent last week, the group argued the deal threatens American jobs and violates existing collective bargaining agreements.
On the political front, opposition has centered on the loss of an iconic American manufacturer to foreign hands. Critics argue it represents a troubling hollowing out of America’s industrial base.
Senator John Fetterman (D-PA), whose state is home to U.S. Steel’s headquarters, has vowed to try and block approval of the deal. In a statement, Fetterman said:
“I’ll be using whatever tool is available in the tool box to stop the sale from going forward as structured.”
On the Republican side, Senator J.D. Vance of Ohio has promised to introduce legislation aimed at stopping the acquisition.
Vance argues the Biden administration’s climate policies and trade actions have weakened America’s steel industry, paving the way for the proposed Nippon Steel purchase.
What Comes Next for the Deal
With scrutiny from both the White House and Congress, the path forward for Nippon Steel’s acquisition bid remains unclear.
The firms have not announced a specific timeline but reaching a decision could take 6 months to a year given the complex national security review process. During that period, Nippon may need to make concessions, such as maintaining certain U.S. Steel facilities, to ease concerns in Washington.
Ultimately, whether the landmark deal goes through comes down to threading the needle between assuaging worries over America’s manufacturing base while still sending a welcoming signal to foreign investment.
Striking that balance will likely require tough negotiations between Nippon Steel, policymakers in both Washington and Tokyo, and figures from across the political spectrum.
Background on the Two Steel Giants
United States Steel
Founded by industrial titans J.P. Morgan and Andrew Carnegie in 1901, U.S. Steel was the largest steel producer in the world during the early 20th century. It has played an integral role in building iconic American infrastructure like the Empire State Building and Golden Gate Bridge.
In more recent decades, increased global competition has challenged U.S. Steel but it remains a top American manufacturer. Key details on U.S. Steel:
- Second largest U.S. steel producer
- Approx 12,500 employees
- Operates mills including the historic Gary Works plant in Indiana
- Produces specialized steel used in applications from appliances to national defense
Formed in 1970 from the merger of two Japanese steel firms, Nippon Steel is currently the world’s third largest steelmaker. It is also a highly efficient producer that utilizes cutting-edge automation and technology in its mills.
As with other Japanese conglomerates, Nippon Steel retains close collaborative ties with Japan’s government. The firm also has a stated goal of shifting more production offshore to hedge currency risks.
- World’s #3 steel producer
- Approx 50,000 employees
- Operates mills across Japan, Asia and the Americas
- Among most efficient steelmakers globally
The proposed tie-up would make Nippon the second largest global steel producer behind China’s Baowu Steel Group, while vaulting it ahead of competitors in South Korea, India and Europe.
The attempt by Nippon Steel to acquire an American industrial icon has understandably raised concerns in Washington over impacts to U.S. manufacturing and economic competitiveness.
But as some analysts argue, securing U.S. Steel’s long-term future might ultimately require the scale and resources of a larger global player. And deeper business ties between allies could carry geopolitical benefits as democracies look to counter the rise of China.
Striking the optimal outcome for American workers and strategic interests won’t be straightforward amidst the complex pressures tying together economics, politics and national security. But over the coming months, the state of this landmark deal should provide critical insights into the Biden administration’s approach to these intersecting policy spheres.
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