Nippon Steel and U.S. Steel filed a federal lawsuit challenging the Biden administration's decision to block a proposed nearly $15 billion deal for Nippon to acquire Pittsburgh-based U.S. Steel.
The suit, filed Monday in the U.S. Court of Appeals for the District of Columbia, alleges that it was a political decision and violated the companies' due process.
“From the outset of the process, both Nippon Steel and U.S. Steel have engaged in good faith with all parties to underscore how the Transaction will enhance, not threaten, United States national security, including by revitalizing communities that rely on American steel, bolstering the American steel supply chain, and strengthening America’s domestic steel industry against the threat from China," the companies said in a prepared statement Monday. “Nippon Steel is the only partner both willing and able to make the necessary investments.”
Nippon Steel had promised to invest $2.7 billion in U.S. Steel’s aging blast furnace operations in Gary, Indiana, and Pennsylvania’s Mon Valley. It also vowed not to reduce production capacity in the United States over the next decade without first getting U.S. government approval.
Biden on Friday decided to stop the Nippon takeover — after federal regulators deadlocked on whether to approve it — because “a strong domestically owned and operated steel industry represents an essential national security priority. ... Without domestic steel production and domestic steel workers, our nation is less strong and less secure," he said in a statement.
While administration officials have said the decision was unrelated to Japan's relationship with the U.S. — this is the first time a U.S. president has blocked a merger between a U.S. and Japanese firm.
Biden departs the White House in just a few weeks.
U.S. & World
The president's decision to block the deal comes after the Committee on Foreign Investment in the United States, known as CFIUS, failed to reach consensus on the possible national security risks of the deal last month, and sent a long-awaited report on the merger to Biden. He had 15 days to reach a final decision.
In a separate lawsuit filed in the U.S. District Court for the Western District of Pennsylvania on the same day, the companies accused steel-making rival Cleveland-Cliffs Inc. and its CEO, Lourenco Goncalves, in coordination with David McCall, the head of the U.S. Steelworkers union, of “engaging in a coordinated series of anticompetitive and racketeering activities” to block the deal.
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Cleveland-Cliffs offered to buy U.S. Steel for $7 billion in 2023 before U.S. Steel accepted the buyout offer from Nippon.
U.S. Steel turned down the Cleveland-Cliffs offer and later accepted a nearly $15 billion, all-cash offer from Nippon Steel — the deal that Biden nixed Friday.
The companies allege that Goncalves, in collusion with the U.S. Steelworkers, maneuvered to prevent any party other than Cleveland-Cliffs from acquiring U.S. Steel and to damage the Pittsburgh manufacturer’s ability to compete.
Neither the Steelworkers nor Ohio's Cleveland-Cliffs responded immediately to requests by The Associated Press for comment.
Nippon and U.S. Steel said in the lawsuit that they submitted three draft national security agreements to CFIUS in the fall to address any concerns.
The companies said in their lawsuit that CFIUS was told not to offer any counterproposals or hold discussions with them. Nippon and US Steel argue that the review process was manipulated so that the outcome would support a decision they say Biden had already made.
The companies said that President Biden used “undue influence to advance his political agenda.”
Nippon, however, will face an incoming administration that has also vowed to block the deal.
President-elect Donald Trump last month underscored his intention to block the deal, and pledged to use tax incentives and tariffs to strengthen the iconic American steelmaker.
Trump had vowed early in the presidential campaign that he would “instantaneously” block the deal, and he reiterated that sentiment in a post on his Truth Social platform in early December.
Shares of United States Steel Corp. rose more than 3% before the opening bell Monday.
