WP Reports... "Announcement Within Days"
Alliance Halts Japanese Company Over 'National Security Concerns'
Political Judgment Ahead of US Presidential Election
US Steel Takes Defensive Stance... Stock Plummets 20%
The U.S. administration under Joe Biden has decided to block the sale of its domestic steel company US Steel to Japan. With the presidential election just over two months away in November, the administration is taking a strong stance by citing potential national security threats against an allied country's company to secure decisive labor votes in key battleground states. The U.S. daily The Washington Post (WP) pointed out, "This will be a shocking case of rejecting a deal proposed by an ally amid political controversy ahead of the November election," and warned that "such a move could set back relations with Japan."
On the 4th (local time), WP reported, citing key sources familiar with the matter, that the Biden administration has decided to block Nippon Steel's acquisition of US Steel due to national security concerns.
Nippon Steel announced in December last year that it would acquire US Steel for $14.9 billion (about 20 trillion won). The news that US Steel, a symbol of American steel manufacturing, would be sold to Japan sparked strong opposition from labor unions and political circles, and the merger and acquisition (M&A) between the two companies has faced difficulties amid the election season.
Currently, both the U.S. Department of Justice and the Committee on Foreign Investment in the United States (CFIUS) under the Treasury Department are reviewing Nippon Steel's acquisition of US Steel. The Department of Justice is examining whether the deal violates antitrust laws, while CFIUS is assessing potential national security threats. If CFIUS determines there are national security concerns, it can recommend the president to block the M&A. It is known that CFIUS recently concluded that transferring US Steel to Nippon Steel would expose the U.S. to insurmountable national security risks. The White House stated it has not yet received CFIUS's recommendation.
The timing of the Biden administration's announcement to block the sale of US Steel remains unclear. However, it is reported that the decision will be announced within a few days.
Vice President Kamala Harris, the Democratic presidential candidate, is scheduled to visit Pittsburgh, Pennsylvania, where US Steel's headquarters is located, on the 5th, raising attention to whether an official announcement will be made at that time. Earlier, on Labor Day, September 2nd, Harris campaigned jointly with President Biden in Pittsburgh, stating, "US Steel is a historic American company," and "It must remain a company owned and operated by Americans." This aligns with President Biden's position, who issued a statement opposing the sale of US Steel in March. Former President Donald Trump, the Republican presidential candidate, also publicly opposed the sale, saying, "We revived the steel industry during my first term, and it's terrible that US Steel is being sold to Japan," and vowed to "stop it immediately."
The Biden administration's decision to block Nippon Steel's acquisition of US Steel is seen as a strategic move to secure labor votes ahead of the election. Winning the votes of voters in seven battleground states is crucial for victory, and among them, Pennsylvania, Michigan, and Wisconsin are battleground states located in the Rust Belt, a declining industrial region where labor support is significant. Especially Pennsylvania, where US Steel's headquarters is located, has the largest number of 19 electoral votes among the seven battleground states, making it a fiercely contested area.
US Steel's management is pushing forward with the sale, even mentioning plant closures. However, as the election approaches, the deal is likely to fall through due to political decisions. David Burritt, CEO of US Steel, stated in an interview with The Wall Street Journal (WSJ) that if the sale to Nippon Steel fails, the company will close plants and relocate its headquarters.
Following news that the Biden administration will block the sale of US Steel, the company's stock price plunged 19.7% compared to the previous trading day in the New York stock market at 3 p.m. that day.
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