Japanese Company Postpones Acquisition of American Steel Company
The controversial $14.9 billion deal to sell U.S. Steel to Japan-based Nippon Steel Corporation has been delayed while the U.S. Department of Justice (DOJ) reviews the acquisition. That is according to a May 3 statement from Nippon.
Both Nippon and U.S. Steel received DOJ requests for more documents in connection with an antitrust review of the merger. After that request, Nippon moved the closing date back roughly three months, from the second or third quarter of 2024 to the third or fourth quarter of 2024. With so many details in the transaction, the closing date is, and has been, an estimated time frame.
U.S. Steel held a special stockholders meeting on April 12 and approved the time-frame change. This week, U.S. Steel reported first-quarter 2024 net earnings of $171 million.
Under Federal Review
The Federal Trade Commission (FTC) and the DOJ review most of the proposed transactions that affect commerce in the United States and, in an antitrust review, either agency can take legal action to block deals that it believes would “substantially lessen competition.”
Antitrust laws aim to encourage competition by limiting the market power of any one company.
Companies undergo a preliminary antitrust review to determine whether the deal raises any antitrust concerns that warrant closer examination. If it does, more documents are requested. This is often called a “second request,” and that is what has happened here.
After both parties have fulfilled the request for documents, the DOJ will have 30 days to review the papers and then there are three possible outcomes, according to the FTC.
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The DOJ would either close the investigation; enter a settlement with the companies; or take legal action in federal district court or through an administrative process to block the deal from going forward.
Nippon said it will continue to fully cooperate with the DOJ and is determined to complete the transaction.
In a March 14 statement, President Joe Biden said he opposed the sale.
“It is important that we maintain strong American steel companies powered by American steel workers. I told our steel workers I have their backs, and I meant it,” the statement said. “U.S. Steel has been an iconic American steel company for more than a century, and it is vital for it to remain an American steel company that is domestically owned and operated.”
Also in opposition to the sale is the United Steelworkers Union, a deep-pocketed financial supporter of President Biden’s reelection effort.
Steel plays a major role in national security as the main material used in building ships, airplanes, ammunition, and firearms.
Last week, Lourenco Goncalves, the CEO of Ohio steelmaker Cleveland-Cliffs, told WTAE Television that if the Nippon deal is blocked, his company, which had originally sought to purchase U.S. Steel before Nippon came into the picture, still wants to buy U.S. Steel. The United Steelworkers Union had endorsed that plan.
