Nippon Steel has accused the White House of improperly influencing the Committee on Foreign Investment in the United States (CFIUS) review of its $14.9 billion bid for U.S. Steel, threatening legal action if the deal is blocked. This claim arises from a Dec. 17 letter sent to CFIUS by legal counsel for both Nippon Steel and U.S. Steel.
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CFIUS, responsible for assessing national security risks associated with foreign acquisitions, faced a Monday deadline to approve, extend the review, or recommend that President Biden reject the deal. However, an anticipated government shutdown was expected to pause this deadline.
Reuters previously reported that CFIUS, in a 29-page letter, highlighted unresolved national security risks, potentially paving the way for President Biden, a long-time opponent of the merger, to block it.
Nippon Steel Alleges Undue Influence and Bias
Nippon Steel and U.S. Steel, in their response letter, refuted CFIUS’s national security concerns and alleged that President Biden exerted undue influence on the review process before CFIUS could reach a conclusion.
The letter specifically suggests that President Biden might have intervened to appease United Steelworkers (USW) President David McCall, an opponent of the merger who endorsed Biden for president shortly after he voiced his opposition to the deal. Biden’s stated opposition stems from his belief that U.S. Steel should remain under American ownership and operation. The companies allege that Biden’s stance, potentially influenced by third parties like Cleveland-Cliffs CEO Lourenco Goncalves and McCall, undermines the integrity of the CFIUS process. Cleveland-Cliffs, a previous suitor for U.S. Steel, also opposes the Nippon Steel deal.
White House Denies Allegations, U.S. Steel Remains Committed
White House spokesperson Saloni Sharma denied the allegation of undue influence, stating it was “not true,” but declined to comment on whether President Biden would ultimately block the deal. Sharma emphasized the President’s commitment to respecting the CFIUS process. U.S. Steel reaffirmed its commitment to finalizing the transaction and collaborating with all involved parties. Both Nippon Steel and Cleveland-Cliffs CEO Lourenco Goncalves declined to comment on the matter.
Historical Opposition and Political Landscape
The proposed merger has encountered significant opposition since its announcement a year ago. Both President Biden and former President Donald Trump, during their respective campaigns, expressed disapproval, aiming to garner support from union voters in Pennsylvania, U.S. Steel’s home state. Both presidents asserted that the iconic American company should remain American-owned.
An Aug. 31 CFIUS letter, obtained by Reuters, raised concerns about the deal’s potential impact on the supply of steel for crucial infrastructure projects, seemingly accelerating the merger toward rejection. However, Nippon Steel argued that its investments, originating from an allied nation, would bolster U.S. Steel’s production, securing a 90-day review extension. This extension pushed the decision beyond the November election, raising hopes that a less politically charged environment might favor the deal’s approval.
Allegations of Personal Assurances and Potential Legal Challenge
The Dec. 17 letter cites a February USW news release in which McCall claimed to have received “personal assurances” from President Biden regarding support for the union’s position. The White House denied that Biden’s opposition was influenced by McCall, referencing Biden’s March statement against the deal. McCall dismissed Nippon Steel’s allegations as unfounded rumors and distractions.
Should President Biden block the acquisition, Nippon Steel intends to file a legal challenge in the U.S. Court of Appeals for the DC Circuit, alleging a violation of due process and presidential authority under CFIUS regulations.
