US Steel and Nippon Steel are suing the Biden administration over blocked merger

US Steel and Nippon Steel are suing the Biden administration over blocked merger

US Steel and Japan-based Nippon Steel sued the Biden administration on Monday over a decision last week to block a merger between the two companies.

A proposed $14 trillion takeover by Nippon of the second-largest domestic steel producer would threaten U.S. national security, the Biden administration said.

The two companies allege in their lawsuit that political considerations during the election campaign undermined formal government review of the merger.

The lawsuit in the U.S. Court of Appeals for the District of Columbia alleges that the Biden administration used the government review process as a pretext to reject the merger as a favor to the United Steelworkers (USW) union.

“President Biden’s order is the culmination of a months-long campaign to undermine and exploit the United States national security apparatus to fulfill a promise made by the President and his advisers to USW leadership,” Nippon Steel and US Steel said Monday in a statement, in which they present their complaint.

The decision to block the merger came weeks after a federal panel declined to make a recommendation on the US Steel-Nippon Steel deal, giving Biden the opportunity to block the deal.

The Committee on Foreign Investment in the United States (CFIUS), tasked with reviewing the potential takeover, expressed concerns about the national security risks posed by the loss of a key domestic steel producer.

Biden reiterated those national security fears in a statement as he blocked the deal on Friday.

“Without domestic steel production and domestic steelworkers, our nation is less strong and less secure,” Biden said.

According to US Steel and Nippon Steel, Biden first announced plans to block the merger in March 2024, before CFIUS began reviewing the deal’s national security implications.

Signage for Nippon Steel Corp. in front of the Marunouchi Park Building, where the company’s headquarters is located, in Tokyo, March 25, 2024.

Kiyoshi Ota/Bloomberg via Getty Images, FILE

USW has a large concentration of workers in the influential swing state of Pennsylvania, US Steel and Nippon Steel said in Monday’s statement. The union says it currently has 1.2 million members.

“CFIUS engaged in a process designed to achieve a predetermined outcome: supporting President Biden’s policy decision,” US Steel and Nippon Steel continued in their joint statement on Monday.

US Steel and Nippon Steel also filed a second lawsuit against Cleveland-Cliffs, another domestic steelmaker, and USW President David McCall, alleging they coordinated illegal efforts to prevent the merger.

Cleveland-Cliffs sought its own merger with US Steel, the lawsuit says. In the absence of such a merger, Cleveland-Cliffs entered into an agreement with USW to prevent Nippon Steel from acquiring US Steel, the lawsuit says.

The lawsuit, filed in the U.S. District Court for the Western District of Pennsylvania, also names Cleveland-Cliffs CEO Lourenco Goncalves as a defendant for his alleged involvement in the coordinated activity alleged in the lawsuit.

“The anti-competitive and illegal actions were brazen and obvious – consisting of public lies, pressure tactics and an illegal antitrust conspiracy,” US Steel and Nippon Steel said in their Monday statement.

In a statement to ABC News on Monday, USW President McCall pledged his support for the Biden administration’s decision to block the merger and vowed to fight the allegations made against USW.

“By blocking Nippon Steel’s attempt to acquire US Steel, the Biden administration protected vital U.S. interests, protected our national security and helped preserve a domestic steel industry that supports our nation’s critical supply chains,” McCall said. “We are reviewing the complaint and will vigorously defend ourselves against these unfounded allegations.”

USW previously welcomed the Biden administration’s decision to block the merger after it was announced on Friday.

Cleveland-Cliffs did not immediately respond to ABC News’ request for comment.

Shares of US Steel rose nearly 4% in premarket trading Monday morning. Cleveland-Cliffs’ stock price also rose about 4% in early trading Monday.

Leave a Reply

Your email address will not be published. Required fields are marked *