Why the White House rejects a Japanese company's offer to take over a US steel maker – The Indian Express

Japanese steel giant Nippon Steel’s plans to buy Pittsburg-based US Steel have faced opposition from both Democratic and Republican lawmakers – and now the Joe Biden administration. The bipartisan opposition to the $14.9 billion deal appears to be at odds with the fundamental American commitment to free markets and unrestricted entrepreneurship.

Critics of the deal argue that the acquisition of the storied American company, founded in 1901 by JP Morgan and Andrew Carnegie and at its peak one of the largest companies in the world, will threaten U.S. national security and impact union jobs in Pennsylvania could – a key battleground state.

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United Steelworkers, a powerful union that supported Biden’s 2020 presidential bid, has opposed the deal.

Late Thursday, the White House said the proposed acquisition of U.S. Steel by a foreign company “requires serious review in light of its potential impact on national security and supply chain reliability.”

Short-sighted objections

There are several problems here.

First, Nippon Steel is Japan’s largest steel producer and one of Washington’s closest allies – an alliance the State Department describes as “the cornerstone of U.S. security interests in Asia and … fundamental to regional stability and prosperity.”

Festive offer

According to the US, the alliance is based on “common vital interests and values, including maintaining stability in the Indo-Pacific region, preserving and promoting political and economic freedoms…”

The argument for the imperative of US national security therefore seems difficult to digest.

Second, Nippon Steel, the world’s fourth-largest steelmaker, is well capitalized and could bring more stability to US Steel’s operations. The takeover would make the combined company one of the world’s three largest steel producers and create one of the largest steel companies outside of China – restoring the iconic American company’s former glory and fueling Washington’s renewed production push.

Third, this is not a hostile takeover. US Steel has been looking for a buyer since August after it rejected an unsolicited offer from an American competitor.

Fourth, the terms of the deal, which still needs to be approved in an upcoming vote by US Steel shareholders, appear reasonable. Nippon Steel would pay $55 per share, a 40% premium with no debt assumed. Additionally, US Steel will remain headquartered in Pittsburgh and retain its name.

After all, Nippon Steel is no newcomer to America – the company has been operating in this country for four decades, starting with a joint venture project with Wheeling-Pittsburgh Steel in West Virginia.

Roadmap, hurdles ahead

The influential United Steelworkers, which was instrumental in pushing President Donald Trump to impose tariffs on steel imports while he was in office, called the deal “short-sighted” and said it would help block the takeover.

Union President David McCall said in a statement that the union remained open to working with US Steel to keep the company domestically owned and operated, but instead opted to “put aside the concerns of its dedicated workforce and… to sell a foreign company”. own company”.

Neither US Steel nor Nippon consulted the union, “which in itself is a violation of our partnership agreement,” McCall said.

There are also regulatory hurdles. A group of Republican senators wrote to Treasury Secretary Janet Yellen after the deal was announced, arguing that the Committee on Foreign Investment in the United States (CFIUS) – an interagency panel chaired by the Treasury secretary – had the authority to approve takeovers of US companies Block Foreign companies should block the transaction if the deal poses a threat to U.S. national security.

Lael Brainard, director of the National Economic Council, part of the executive office of the president, said the deal looked “like the type of transaction” that CFIUS is supposed to investigate and that the administration “will be prepared to look closely at it.” “. to inform about the results of such an investigation and to take action if necessary.”

However, Portal reported, citing traders, that it would be difficult for CFIUS to block the deal because Nippon is from Japan, a U.S. ally that has invested in North America in the past.

The deal also needs to win shareholder approval – which may not be a big problem.

Shares of US Steel rose sharply after Monday’s announcement, while Nippon shares fell on concerns that the company had overpaid to acquire a company long considered underperforming. US Steel employs more than 20,000 people worldwide, including more than 14,000 in the United States.