Controversial $14.9 Billion Deal to Sell U.S. Steel to Japan-based Nippon Steel Delayed as DOJ Reviews Acquisition

Controversial $14.9 billion Deal to Sell U.S. Steel Delayed as DOJ Reviews Acquisition

The $14.9 billion deal between U.S. Steel and Japan-based Nippon Steel Corporation has hit a roadblock as the U.S. Department of Justice (DOJ) reviews the acquisition. This delay has been confirmed by Nippon in a statement released on May 3. Both companies have received requests from the DOJ for additional documents as part of the antitrust review process. Consequently, Nippon has pushed back the closing date of the deal by approximately three months, now expected to take place in the third or fourth quarter of 2024.

It’s important to note that the closing date has always been an estimated timeframe, given the complexity of the transaction. U.S. Steel held a special stockholders meeting on April 12 to discuss and approve this change in the timeline. In their latest financial report, U.S. Steel announced net earnings of $171 million for the first quarter of 2024.

The Federal Trade Commission (FTC) and the DOJ play significant roles in reviewing proposed transactions that impact commerce in the United States. Their primary focus during antitrust reviews is to prevent deals that would “substantially lessen competition.” This is in line with antitrust laws, which aim to promote fair competition by limiting the market power of individual companies.

During a preliminary antitrust review, regulators assess whether a deal raises any concerns that require closer examination. If concerns arise, a “second request” for more documents is made, which is precisely what has happened in this case. Once both parties have provided the requested documents, the DOJ has 30 days to review them. Following this, there are three possible outcomes: closing the investigation, reaching a settlement with the companies involved, or taking legal action to block the deal from proceeding.

Nippon has stated its commitment to fully cooperate with the DOJ and is determined to see the transaction through. However, it is worth noting that President Joe Biden expressed his opposition to the sale in a statement made on March 14. President Biden emphasized the importance of maintaining strong American steel companies that are domestically owned and operated, stating his support for American steelworkers.

The United Steelworkers Union, a significant financial supporter of President Biden’s reelection effort, also opposes the sale. They have endorsed an alternative plan put forth by Ohio steelmaker Cleveland-Cliffs, which originally intended to purchase U.S. Steel before Nippon entered the scene. This alternative plan has gained traction, with Lourenco Goncalves, the CEO of Cleveland-Cliffs, expressing interest in acquiring U.S. Steel if the Nippon deal falls through.

The opposition to the sale of U.S. Steel is not only driven by economic concerns but also by national security considerations. Steel plays a crucial role in national security as it is used in the construction of ships, airplanes, ammunition, and firearms. Preserving a strong domestic steel industry is seen as vital for maintaining a robust national defense capability.

In summary, the controversial $14.9 billion deal to sell U.S. Steel to Nippon Steel Corporation has been delayed as the DOJ conducts an antitrust review. The outcome of this review will determine whether the deal proceeds as planned, faces legal action, or undergoes a settlement process. The opposition from President Biden and the United Steelworkers Union adds further complexity to the situation. Additionally, the national security implications of the sale further underscore the significance of the decision that lies ahead.