U.S. President Joe Biden blocked Japan’s Nippon Steel Co.’s $15 billion takeover of U.S. Steel Corp., dealing a setback to Washington’s ties with its closest Asia-Pacific allies and prompting the companies to threaten legal action.
Biden, who has long opposed the acquisition, issued an order on Friday forcing Nippon Steel and U.S. Steel to “fully and permanently abandon the proposed transaction” within 30 days.
In response, the companies called the move a “clear violation of due process” and the law. In indicating possible legal action, they added: “In light of President Biden’s decision, we have no choice but to take all appropriate actions to protect our legal rights.”
A provision in the original agreement with U.S. Steel required Nippon to pay a $565 million termination fee if the deal was blocked.
Biden’s extraordinary intervention came with just 17 days left in his term, capping a presidency that has sought to grow U.S. jobs and abandoned the free-trade agenda of previous administrations.
It could also raise concerns about the United States’ future receptivity to foreign investment, with President-elect Donald Trump, who won November’s election on a protectionist platform, also opposed to the deal.
The companies said the U.S. government’s actions were “shocking and deeply disturbing.” . . Treat an ally like Japan in this way.” They added: “Unfortunately, this sends a chilling message to any company based in a U.S. allied country considering making significant investments in the United States.”
In his order, Biden said there was “credible evidence” that through the acquisition, Japan “may take actions that threaten to harm the national security of the United States.”
The Committee on Foreign Investment, which reviews foreign acquisitions, failed to reach consensus on whether the deal posed a national security threat by a Dec. 23 deadline.
The companies said the president did not provide any “credible evidence of national security concerns,” adding that “the process did not comply with the law but was rigged to advance President Biden’s political agenda.”
They added that the CFIUS process was “riddled with political corruption and the outcome was predetermined”.
Biden’s intervention marks the end of Nippon Steel’s ambitious expansion plans, which have turned into a sensitive political issue in a U.S. election year.
The outgoing president is known for his support for organized labor after the United Steelworkers strongly opposed the deal. Despite intense lobbying by U.S. Steel and Nippon Steel executives in recent weeks, the group’s actions proved fatal to the takeover.
Shares of U.S. Steel fell nearly 8% in premarket trading on Friday.
Opponents of the takeover welcomed Biden’s move.
“This deal . Sen. Sherrod Brown, D-Ohio, wrote on X.
Biden’s move to cancel the deal would put U.S. Steel’s fortunes in jeopardy. The company has warned that if the deal is blocked, it could be forced to close factories and reduce its workforce, and could even move its headquarters from Pittsburgh, Pennsylvania.
Japan’s proposed takeover plan has received strong support in parts of the United States that could benefit from the investment and technology promised by Japanese companies.
William Zhou, deputy director of the Japan Chair at the Hudson Institute think tank, said the decision would devastate steelmaking communities in western Pennsylvania and Indiana.
“President Biden talks about protecting the U.S. steel industry, but only in the abstract,” he added. “He never had any contact with real steelworkers or discussed the technology they needed to protect the steel industry.”
Japanese officials, who spoke on condition of anonymity, have previously said that while they understand the risks Japanese companies face from political interference when launching bids ahead of the U.S. presidential election, it is puzzling that a Japanese company should be labeled a security risk.
Heino Klink, the former deputy assistant secretary of defense for East Asia, said it was “ironic and ridiculous” to block the deal citing national security concerns because Japan deploys the world’s largest forward-deployed force of U.S. troops.
“This decision will cast a shadow over the league,” he said. “It’s really unfortunate that the Biden administration is presenting another argument to the Chinese Communist Party that the United States is not a reliable partner.”
