Nippon and US Steel launch legal challenge after Biden administration blocks $15 billion deal

Nippon Steel and US Steel have initiated a federal lawsuit against the Biden administration, challenging its decision to block a proposed nearly $15 billion acquisition of the Pittsburgh-based US Steel by the Japanese steelmaker.

The lawsuit, filed on Monday in the US Court of Appeals for the District of Columbia, alleges that the decision was politically motivated and violated the companies’ due process rights.

This legal action marks a significant escalation in the battle over the controversial merger.

“Good Faith” efforts rejected, companies claim

“From the outset of the process, both Nippon Steel and US Steel have engaged in good faith with all parties to underscore how the Transaction will enhance, not threaten, United States national security, including by revitalizing communities that rely on American steel, bolstering the American steel supply chain, and strengthening America’s domestic steel industry against the threat from China,” the companies said in a prepared statement on Monday.

Nippon Steel is the only partner both willing and able to make the necessary investments.

Nippon Steel had committed to investing $2.7 billion into US Steel’s aging facilities in Gary, Indiana, and Pennsylvania’s Mon Valley.

The company also pledged not to reduce production capacity in the United States over the next decade without prior approval from the US government.

Biden’s national security justification

President Biden ultimately decided to block the Nippon takeover after federal regulators reached an impasse on whether to approve it, citing that “a strong domestically owned and operated steel industry represents an essential national security priority. … Without domestic steel production and domestic steel workers, our nation is less strong and less secure,” in a statement released Friday.

While administration officials have stated the decision was unrelated to Japan’s relationship with the US, it marks the first time a US president has blocked a merger between a US and Japanese company.

The move comes as President Biden is set to leave office in just a few weeks.

Accusations of anticompetitive behavior

In a separate lawsuit, also filed on Monday, in the US District Court for the Western District of Pennsylvania, the companies accuse steel-making rival Cleveland-Cliffs Inc. and its CEO, Lourenco Goncalves, in coordination with David McCall, the head of the US Steelworkers union, of “engaging in a coordinated series of anticompetitive and racketeering activities” to block the deal.

Prior to US Steel accepting the offer from Nippon, Cleveland-Cliffs had offered to purchase US Steel for $7 billion in 2023, an offer that was rejected in favor of Nippon’s nearly $15 billion bid.

The companies allege that Goncalves, in collusion with the US Steelworkers, sought to prevent any party other than Cleveland-Cliffs from acquiring US Steel and to damage the Pittsburgh manufacturer’s ability to compete.

Claims of a manipulated review process

Nippon and US Steel claim that they submitted three draft national security agreements to the Committee on Foreign Investment in the United States (CFIUS) in the fall to address any potential concerns.

According to the lawsuit, CFIUS was instructed not to offer any counterproposals or engage in discussions with them.

The companies argue that the review process was manipulated to ensure the outcome would support a decision they believe President Biden had already made and that the President used “undue influence to advance his political agenda.”

Trump’s stance reinforces challenges ahead

However, Nippon will also face opposition from the incoming administration, which has also vowed to block the deal.

President-elect Donald Trump has made clear his intention to block the deal, while also pledging to use tax incentives and tariffs to strengthen the American steelmaker.

Trump had vowed to “instantaneously” block the deal early in his presidential campaign and reiterated that position on his Truth Social platform in early December.

In the wake of the news, shares of United States Steel Corp. rose more than 3% before the opening bell on Monday.

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