Japan’s largest steel company’s plan to buy the United States Steel Corporation is facing a wide array of scrutiny, with some calling on the government to step in and scrap the agreement.
Nippon Steel and U.S. Steel announced the deal Monday morning. The price tag for the acquisition is more than $14 billion, with the agreement valuing U.S. Steel at $55 per share. The plan faced immediate blowback, particularly in the Rust Belt, where U.S. Steel has been a fixture since its formation in 1901.
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While U.S. Steel said the deal “brings together two storied companies with rich histories of providing excellent products and services and contributing to the development of society,” lawmakers on both sides of the aisle are singing a different tune.
Sens. J.D. Vance (R-OH), Josh Hawley (R-MO), and Marco Rubio (R-FL) signed a joint letter to Treasury Secretary Janet Yellen calling on the Committee on Foreign Investment in the United States, better known as CFIUS, to block the deal.
Chaired by Yellen, CFIUS is an inter-agency committee that examines foreign investments in American companies for national security concerns. It has the power to stop foreign investment, such as Nippon Steel’s deal with U.S. Steel, after a review process.
“Despite the absence of any security-focused deliberation on U.S. Steel’s part, domestic steel production is vital to U.S. national security,” the senators said in a letter. “Democratic and Republican administrations have both acted decisively over the last forty years to bolster the industry.”
Sanjay Patnaik, director of the Center on Regulation and Markets at the Brookings Institution, told the Washington Examiner that the CFIUS process is more likely to block deals with companies originating from countries that are more adversarial in nature, for instance, places such as Russia or China. Japan, in contrast, is considered a reliable partner.
“I don’t see a compelling national security reason to block it because again, Japan is an ally,” Patnaik said. “And actually, I’ve seen some information that if the deal goes through, the combined joint company could be a pretty good play on the world market, which would pose a counterweight to the Chinese steelmakers.”
Patnaik said that the concerns about the deal appear to be largely centered around concerns about U.S. workers and domestic manufacturing rather than national security fears.
But Republicans aren’t the only ones balking at the purchase and urging that CFIUS block the deal.
Three Pennsylvania Democrats, Sens. John Fetterman and Bob Casey and Rep. Chris Deluzio, sent their own letter to Yellen urging CFIUS to step in.
“This proposed acquisition of U.S. Steel, if completed, would make a foreign-owned company a central part of the American steel industry, as well as a major employer,” they wrote. “As you review this acquisition, we urge you to consider the national security implications of selling a company manufacturing some of our most important industries, including defense, power, and infrastructure, to a foreign company.”
Experts on the matter have told the Washington Examiner that it is unlikely that the deal between Nippon and U.S. Steel will end up being tanked through the CFIUS process, although the possibility can not be completely ruled out.
CFIUS is unlikely to block the deal just because it involves a Japanese buyer. For one thing, CFIUS’s main focus is national security, and Japan is a major U.S. ally in a critical region.
Given the drawbacks and complications of stopping the deal through CFIUS, using an antitrust argument to block it may be a more feasible path for those wishing to stop U.S. Steel from being purchased and controlled by a foreign entity. An argument also could be made that blocking the deal through CFIUS would do more harm than good — from a national security perspective — as it could create some diplomatic headaches and tension between the U.S. and Japan.
“I think it would create some issues with Japan, especially now that the U.S. is trying to bring in our allies in Asia much closer as a counterweight to China,” Patnaik said.
The purchase is also another headache for President Joe Biden heading into a heated election year.
Biden has touted himself as the most union-friendly president in history. But the United Steelworkers union, which represents a big chunk of workers at U.S. Steel, vehemently opposes the sale and wants the administration to step in.
In a statement after the plan was announced, United Steelworkers President David McCall said that neither Nippon Steel nor U.S. Steel reached out to the union about the deal in advance, which he said violated an agreement requiring the company to be notified of a change in control or business conditions.
“Our union intends to exercise the full measure of our agreements to ensure that whatever happens next with U.S. Steel, we protect the good, family-sustaining jobs we bargained,” McCall said. “We also will strongly urge government regulators to carefully scrutinize this acquisition and determine if the proposed transaction serves the national security interests of the United States and benefits workers.”
Brian Deese, the former head of the White House’s National Economic Council, is a campaign adviser for Biden’s 2024 operation. He pushed back on the deal this week and hinted that the administration will be scrutinizing it closely.
“It is concerning, and the announcement raises a set of issues that the administration should and likely will look closely at,” Deese said during a call hosted by the campaign, Reuters reported. “The particulars of this announcement do raise real, legitimate concerns that do need to be looked closely at.”
The White House and Treasury Department declined to comment when contacted by the Washington Examiner about the deal.
The White House on Thursday released a statement from National Economic Advisor Lael Brainard on the matter. Brainard stopped short of outright opposing the deal but also said it deserves to be closely examined. Her statement also noted that Biden is welcoming of manufacturers from across the world investing in American jobs.
"However, he also believes the purchase of this iconic American-owned company by a foreign entity — even one from a close ally — appears to deserve serious scrutiny in terms of its potential impact on national security and supply chain reliability," Brainard said, suggesting that CFIUS will look into the matter.
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If the deal goes through, it will be the end of an era for a company that has been at the forefront of the domestic steel industry for more than a century. U.S. Steel was formed by J.P. Morgan, Andrew Carnegie, Charles Schwab, and others in 1901.
Notably, even if the purchase goes through, the deal stipulates that U.S. Steel will keep its name and headquarters.