Outgoing President Joe Biden dropped a bombshell when he issued an executive order last month blocking the purchase of United States Steel (USS) by Japan’s Nippon Steel, citing national security concerns.
The decision has set off a rash of vituperative exchanges between Nippon Steel and Cleveland-Cliffs, whose earlier bid USS pushed aside in favor of the Japanese company’s more generous offer. Nippon Steel has since sued the US government and, separately, Cleveland-Cliffs and the United Steelworkers, saying Biden’s decision was politically motivated and that Cleveland-Cliffs and the union colluded to kill the deal.
Cleveland-Cliffs is fighting back. In a no-holds-barred press conference shortly after Biden’s announcement, Lourenco Goncalves, CEO and chair, said the company is still interested in purchasing USS, reportedly in collaboration with rival Nucor—an “all-American solution”—before lacing into Japan as “evil.”
Adding to the drama, Ancora Holdings, a Cleveland-based asset manager, has acquired a stake in U.S. Steel and nominated a slate of directors and a candidate for CEO who advocate keeping the fabled company independent and improving its profitability. USS has responded that “Ancora’s interests are not aligned with all U.S. Steel shareholders.”
Nippon Steel, for its part, remains committed to the deal. President Donald Trump might have a say as well.
“The Trump administration is not in any way bound by executive orders the previous administration made,” says Robert Friedman, partner at Holland & Knight in Washington, DC. If he wanted to, Friedman says, Trump could rescind Biden’s order, allowing U.S. Steel and Nippon Steel to explore procedural options to persuade the Committee on Foreign Investment in the United States (CFIUS) to revisit its assessment of national security issues.
Trump vociferously opposed the Nippon-USS tie-up while campaigning. But the new president has been known to change his mind frequently.
Should Nippon Steel pull out and Cleveland-Cliffs press its case once again, the deal would elicit anti-trust concerns. It could give Cleveland-Cliffs a dominant position in integrated American steel production, Kyle Lundin, principal consultant at Wood Mackenzie, points out.
