Joe Biden blocked Nippon Steel’s $15 billion acquisition of US Steel

US President Joe Biden blocked a $15 billion deal by Japan’s Nippon Steel Corp to buy US Steel, dealing a setback to Washington’s relations with its closest allies in the Asia-Pacific region and prompting companies to threaten legal action.

BidenNippon, which has long opposed the purchase, issued an order on Friday requiring Nippon and US Steel to “completely and permanently abandon the proposed transaction” within 30 days.

In response, the two companies called the move a “clear violation of due process” and the law. Referring to the potential legal action, they added: “Following President Biden’s decision, we have no choice but to take all appropriate measures to protect our legal rights.”

There is a clause in the original agreement with US Steel that requires this Nippon To pay $565 million in breakage fees if the deal is blocked.

Biden’s extraordinary intervention, which comes just 17 days into his term, caps a presidency in which he has sought to boost American jobs and moved away from the free trade agenda of previous administrations.

This agreement is also likely to raise concerns about the extent to which the United States will accept foreign investment in the future, with President-elect Donald Trump, who won the election last November on a protectionist platform, also opposing the deal.

The companies said it was “shocking and deeply troubling that the US government would do this…” . . Treat an ally like Japan this way.” “Unfortunately, it sends a scary message to any company based in a US-allied country considering a major investment in the United States,” they added.

Biden said in the executive order that there is “credible evidence” that through the acquisition, “Nippon may take actions that threaten to impair the national security of the United States.”

The Committee on Foreign Investment, which examines foreign takeovers, failed to reach a consensus by the December 23 deadline on whether the deal poses a threat to national security.

The companies said the president did not provide any “credible evidence of a national security issue,” adding that “instead of adhering to the law, the process was manipulated to advance President Biden’s political agenda.”

They added that the CFIUS process was “heavily corrupted by politics, and the outcome was predetermined.”

Biden’s intervention represents the failure of an ambitious expansion plan for Nippon Steel, which has turned into a sensitive political issue in the US election year.

The decision by the outgoing president, known for his support of organized labor, follows fierce opposition to the deal from the United Steelworkers union. The group’s campaign has proven fatal to the purchase, despite intense lobbying by US Steel and Nippon executives in recent weeks.

Shares of US Steel fell nearly 8 percent in pre-market trading on Friday.

Opponents of the takeover welcomed Biden’s move.

“This deal… represents a clear threat to America’s national and economic security and our ability to enforce our trade laws. That’s why we fought it every step of the way.” “The president is right to Prevent that.”

Biden’s move to cancel the deal will leave US Steel’s fate in limbo. The company warned that it may have to close factories, reduce its workforce, and perhaps even move its headquarters away from Pittsburgh, Pennsylvania, if the agreement is blocked.

Nippon’s proposed acquisition attracted significant support in parts of the United States that would have benefited from the Japanese company’s promised investment and technology.

The decision will devastate steelmaking communities in western Pennsylvania and Indiana, said William Chu, deputy director of the Japan division at the Hudson Research Institute.

He added, “President Biden talks about protecting the American steel industry, but only in the abstract.” “At no time did he engage with actual steelworkers, or address the technology needed to enable them to protect the steel industry.”

Earlier, Japanese officials, speaking on condition of anonymity, said that while they understood the risk of political interference that Nippon faced when it launched a bid ahead of the US presidential election, it was puzzling that a Japanese company would be labeled a security risk.

Heino Klink, former deputy assistant secretary of defense for East Asian affairs, said it was “ironic and illogical” that national security concerns were cited as a rationale for blocking the deal, as Japan hosted the world’s largest forward-deployed US military presence. Troops.

He added, “This decision will cast a shadow over the coalition.” “It is truly unfortunate that the Biden administration has given the Chinese Communist Party yet another talking point about America not being a reliable partner.”