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Nippon Steel and US Steel have taken legal action in the United States, claiming “wrongful interference” after President Joe Biden blocked their proposed $15 billion merger just days earlier.
On Monday, the companies issued a statement explaining that their first lawsuit challenges Biden’s decision, accusing it of “unlawful political interference” in the merger proceedings.
The second lawsuit targets Cleveland-Cliffs, its CEO Lourenco Goncalves, and United Steelworkers president David McCall, accusing them of “illegal and coordinated actions” designed to thwart the merger.
“Nippon Steel and US Steel remain resolved to complete this transaction,” the companies stated emphatically.
President-elect Donald Trump, who is set to assume office in two weeks, entered the conversation on Monday. He advocated for US Steel to retain its independence, questioning the timing of a sale with impending tariffs likely to enhance the company’s profitability and value.
“Why would they want to sell US Steel now?” Trump mused on his Truth Social network. “With tariffs in place, it could quickly reclaim its status as a worldwide leader in the industry.”
This unfolding saga has strained US-Japan relations and raised questions about America’s welcoming stance toward foreign investments and the scrutiny of international acquisitions related to national security.
Biden issued an order on Friday blocking the merger, citing “credible evidence” that Nippon’s acquisition could undermine US security.
The lawsuits argue that Biden sidestepped legal protocols to gain favor with unions and bolster his political agenda. They claim that the Committee on Foreign Investment in the US (Cfius), responsible for assessing foreign buys of US companies, failed to conduct an unbiased review.
The companies assert that the Cfius review process was manipulated to ensure a specific outcome, as Biden had already voiced his opposition to the merger as early as March, well before any security assessments had begun.
Additionally, they aim to demonstrate that Cleveland-Cliffs was determined to prevent any other entities from acquiring US Steel, thus enabling it to monopolize the domestic steel market.
Earlier, Cleveland-Cliffs made an unsolicited bid for US Steel in July 2023, prompting a competitive auction where Nippon emerged as the frontrunner.
Commenting on Monday, USW’s McCall defended the Biden administration’s stance, saying it protected US interests, national security, and preserved the domestic steel industry vital to supply chains. He further indicated that the union intends to “vigorously defend against these baseless allegations.”
Cleveland-Cliffs has yet to comment on the legal proceedings.
The lawsuit follows Biden’s decision to veto the deal, as Cfius could not reach a consensus on whether the merger posed a security risk.
In an effort to address these concerns, Nippon proposed a $2.7 billion investment to modernize facilities and pledged to maintain production capacity for ten years with government approval.
Biden’s veto of the merger between American and Japanese steel giants threatens to destabilize the alliance and business ties with Japan, the US’s primary partner in East Asia.
Japan’s Prime Minister Shigeru Ishiba expressed disappointment during a Monday press conference, urging the US to clarify its security concerns. He highlighted a need to reassure Japanese investors considering future ventures in America.
“It is concerning that Japanese industries are apprehensive about future US investments,” Ishiba commented. “The US must address these worries.”
Historically, US presidents have vetoed eight foreign takeovers following Cfius reviews since 1990, with this being the first involving a Japanese entity.
Notably, legal disputes have arisen when a president intervenes to block a takeover. In 2015, the Chinese-owned Ralls Company reached a settlement after the US government ordered the divestment of four wind farms near an Oregon military base, citing security reasons through a Cfius review.
