Written by Jeff Mason, Alexandra Alper, and Katya Golubkova
The U.S. national security panel conducting a review of Nippon Steel’s $14.9 billion bid for U.S. Steel has allowed the companies to resubmit their application for approval, according to a source familiar with the matter. This decision has postponed a ruling on the politically sensitive merger until after the presidential election on Nov. 5.
This development provides some hope for the companies, as the proposed merger was initially at risk of being blocked following concerns raised by the Committee on Foreign Investment in the United States (CFIUS) on Aug. 31. CFIUS had indicated that the transaction could jeopardize national security by impacting the steel supply chain for critical U.S. industries.
The source mentioned on Tuesday that CFIUS requires additional time to assess the deal’s implications on national security and engage with the involved parties. The resubmission initiates a new 90-day review period for the proposed merger.
It is anticipated that the review process will nearly reach the full 90-day duration, as per another source familiar with the situation.
On Wednesday, Japanese public broadcaster NHK reported that Nippon Steel had refiled the application with CFIUS for its U.S. Steel acquisition plan. Nippon Steel, CFIUS, and U.S. Steel did not provide immediate comments in response to requests from Reuters.
“Extending the timeline alleviates some pressure on the companies and, importantly, postpones the decision past the November election,” stated Nick Klein, a CFIUS attorney with DLA Piper.
The deal has become a contentious political issue, with Vice President Kamala Harris and President Joe Biden expressing a desire for U.S. Steel to remain American-owned and operated. Meanwhile, Republican candidate Donald Trump has vowed to block the deal if elected, as both candidates seek support from union voters.
While delaying the decision until after the U.S. elections may reduce the political tension, it does not guarantee approval, as noted by David Boling, a former U.S. trade official now working as an analyst at Eurasia Group.
The United Steelworkers Union, which strongly opposes the deal, reiterated on Tuesday that the risks associated with Nippon’s acquisition remain unchanged in terms of national security and critical supply chain concerns.
The deal’s progress is closely monitored in Japan, a major foreign investor and a key ally of the U.S. Deputy Chief Cabinet Secretary Hiroshi Moriya emphasized the importance of strengthening economic ties between Japan and the U.S.
Nippon Steel’s shares rose by 1.1% in afternoon trading in Tokyo, while U.S. Steel’s shares closed 0.4% lower on Tuesday.
CFIUS has expressed concerns that Nippon Steel’s merger could impact the supply of steel required for crucial transportation, construction, and agriculture projects. The committee also highlighted the oversupply of inexpensive Chinese steel and raised apprehensions about U.S. Steel potentially refraining from seeking tariffs on foreign steel under Japanese ownership.
In a detailed response to CFIUS spanning 100 pages, Nippon Steel affirmed its commitment to investing billions in U.S. Steel facilities to maintain and potentially enhance domestic steel production capacity in the United States. The company also pledged not to transfer any production capacity or jobs outside the U.S. and assured that it would not interfere in U.S. Steel’s trade-related decisions.
Nippon Steel contended that the merger would create a stronger global competitor to China, grounded in the close relationship between the U.S. and Japan.
Typically, companies withdraw and resubmit their filings to address CFIUS’s concerns and allow for additional time. Refiling applications is a common practice, as highlighted in CFIUS’s 2023 annual report, where 18% of companies seeking approval resubmitted their applications last year.
The final decision on the deal may occur in December, with CFIUS potentially approving the merger with stipulations to address national security concerns, recommending a block, or extending the timeline further.
Source: Reuters
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