Nippon Steel’s
proposed $14 billion takeover of
United States Steel
will have to overcome a number of obstacles—including American politicians whose arguments against the deal don’t make sense.
The acquisition would indeed give a Japanese firm control over the production of a key component of U.S. cars, appliances, and buildings, which has raised alarm bells. Democratic Sen. John Fetterman of Pennsylvania, the state known for its steel, quickly vowed to do everything he can to stop the deal. Republican Sen. J.D. Vance said U.S. Steel remains critical to defense.
“I live across the street from U.S. Steel’s Edgar Thompson plant in Braddock,” Fetterman said in a statement. “It’s absolutely outrageous that U.S. Steel has agreed to sell themselves to a foreign company. Steel is always about security—both our national security and the economic security of our steel communities. I am committed to doing anything I can do, using my platform and my position, to block this foreign sale.”
“Today, a critical piece of America’s defense industrial base was auctioned off to foreigners for cash,” said Vance in a news release. “I warned of this outcome months ago and will oppose it in the months ahead. U.S. Steel announced the sale by celebrating the ‘certain and immediate value’ to be delivered to its shareholders. But rest assured that I will interrogate the long-term implications for the American people, and I will do everything in my power to protect the future of our nation’s security, industry, and workers.”
The mills, however, aren’t being relocated to Japan, and steel technology isn’t highly proprietary these days. Steel chemistries and processes are shared globally. What’s more, the U.S. has had foreign owners—including Japanese—of some steel assets for decades. Foreign auto makers also employ hundreds of thousands of workers in U.S. assembly plants.
Fetterman and Vance didn’t immediately return a request for more details about their objections.
Along with the senators, a key steel union isn’t crazy about the merger. The United Steelworkers, which represents some 11,000 hourly production workers, was also quick to criticize the two companies for not including the union in the consultations.
A U.S. Steel spokeswoman referred Barron’s to an Aug. 17 filing when asked about the union’s views. The filing, essentially, says the company will notify and work with the union while the situation develops.
President Joe Biden just a few months ago promised to get tough on foreign takeovers. His main concern is China. But letting a Japanese company have control over some of the country’s steel is probably still a tough sell to voters as he comes up for reelection in 2024.
There may also be antitrust concerns. The merger would create the world’s fourth-largest steel producer. It was announced just as the Biden Administration issued new rules designed to stop companies from buying up rivals to dominate their industries.
Domination, however, just isn’t a word used in the steel industry. The top five steel makers globally control less than 20% of the market. That is a very low concentration for an industry. The top five car sellers in the U.S. have almost 70% of the market.
What’s more, the Nippon Steel purchase of U.S. Steel doesn’t impact U.S. market share all that much. In fact, the Nippon Steel purchase likely stopped
Cleveland-Cliffs
from increasing its market share. Before the Nippon Steel bid, Cleveland-Cliffs was the leading candidate to acquire U.S. Steel.
Nippon Steel’s offer for U.S. Steel values that company at a 40% premium to Friday’s closing share price. On Monday, when the deal was announced, U.S. Steel shares only jumped 26%. U.S. Steel slipped 1% in Tuesday’s premarket to $49.03. It appears investors also see plenty of risks to overcome before the transaction is completed.
Cleveland-Cliffs stock was little changed early Tuesday. American depositary receipts of
ArcelorMittal,
a European competitor, traded down 0.4%.
S&P 500
and
Dow Jones Industrial Average
futures were both up about 02%.
Write to Brian Swint at [email protected]
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