Mergers and Acquisitions

Nippon Steel’s Proposed Acquisition Of U.S. Steel Draws Scrutiny

In the face of mounting scrutiny of its proposed $14.9 billion acquisition of U.S. Steel, Japanese steelmaker Nippon Steel recently said it plans no U.S. layoffs and wants to invest to expand U.S. facilities.

Nippon announced its proposed acquisition in December, but the sale has become a political football in this election year. The United Steelworkers union came out in opposition. Former president Donald Trump, who is running against President Joe Biden for re-election, said he would block the sale. Biden also voiced opposition to the deal on March 14, saying, “U.S. Steel has been an iconic American steel company for more than a century, and it is vital for it to remain an American steel company that is domestically owned and operated.”

Biden did not say whether he would formally intervene in the sale. The mechanism for doing so would likely be the Committee on Foreign Investment in the United States, which must sign off on the deal. The CFIUS is an interagency committee formed in 1975 by President Gerald Ford by executive order and renewed ever since to review—and if necessary, block—foreign corporate acquisitions thought to affect national security. It includes the heads of nine federal agencies, including the departments of Homeland Security, Justice and State, and is chaired by the Secretary of the Treasury. U.S. Steel shareholders must also approve the deal in April. If all goes as planned, the sale would be completed in September.

Headquarters Move

One day after Biden’s statement, Nippon sought to reassure critics, saying it intended to move its U.S. headquarters from Houston to Pittsburgh if the deal goes through. It added, “Our transaction delivers clear benefits to U. S. Steel, union workers, the broader American steel industry and American national security. Through increased financial investment and the contribution of our advanced technologies to U.S. Steel, Nippon Steel will advance American priorities by driving greater quality and competitiveness for customers in the critical industries that rely on American steel while strengthening American supply chains and economic defenses against China. No other U.S. steel company on its own can meet this challenge while also meeting antitrust requirements. Our aim is to bolster and grow U.S. Steel in the U.S. market in a way that prioritizes its talented employees, and we have provided significant commitments to the United Steel Workers in our continued efforts to reach a mutually agreeable resolution. These include job security, pension security, capital investment, technology sharing, financial reporting and the ability to enforce contractual obligations post-closing.”

U.S. Steel Facilities

U.S. Steel operates several river terminals and barge-served locations. In 2020 it bought Big River Steel in Osceola, Ark., which operates a LEED-certified Flex Mill believed to be the newest and most advanced flat-rolled mill in North America. Big River Steel produces 11 advanced U. S. Steel grades for customers in the automotive, energy, construction and agricultural industries. An expansion in 2020 doubled the mill’s hot-rolled steel production capacity to 3.3 million tons annually, making it one of the largest electric arc furnace-oriented flat-rolled mills in North America.

In December, U.S. Steel President and CEO David B. Burritt said, “NSC has a proven track record of acquiring, operating and investing in steel mill facilities globally–and we are confident that, like our strategy, this combination is truly best for all. This transaction realizes the tremendous value today in our company and is the result of our board of directors’ comprehensive and thorough strategic alternatives process. … Today’s announcement also benefits the United States—ensuring a competitive domestic steel industry, while strengthening our presence globally. Our shared decarbonization focus is expected to enhance and accelerate our ability to provide customers with innovative steel solutions to meet sustainability goals.”