The US national security panel reviewing Nippon Steel’s $14.9 billion bid for US Steel has allowed the companies to refile their application for approval of the deal, according to a person familiar with the matter. This move delays a decision on the politically sensitive merger until after the Nov. 5 presidential election, offering a glimmer of hope for the companies. The Committee on Foreign Investment in the United States (CFIUS) had previously alleged on Aug. 31 that the transaction posed a risk to national security by threatening the steel supply chain for critical US industries. CFIUS needs additional time to fully understand the deal’s impact on national security and engage with the parties involved, the person said on Tuesday. Refiling the application restarts a new 90-day review period for the proposed tie-up, with a decision expected to take close to the full 90 days, according to another person familiar with the matter.
Japanese public broadcaster NHK reported on Wednesday that Nippon Steel had refiled an application with the CFIUS for its US Steel acquisition plan by Wednesday, quoting people familiar with the matter. Nippon Steel declined to comment, while CFIUS and US Steel did not immediately respond to requests for comment from Reuters. “Extending the timeline takes some pressure off the parties and, importantly, pushes the decision past the election in November,” said Nick Klein, a CFIUS lawyer with DLA Piper. The deal has become a political hot potato, with Vice President Kamala Harris, the Democratic presidential nominee, stating at a rally in Pennsylvania, where US Steel is headquartered, that she wants US Steel to remain “American owned and operated,” echoing a view held by President Joe Biden. The White House reiterated this position on Tuesday. Harris’ Republican rival Donald Trump has pledged to block the deal if elected, both candidates seeking to woo union votes.
Postponing the decision to after the US elections will “dial down” the political temperature but does not guarantee approval, said David Boling, a former US trade official who is now an analyst at Eurasia Group. “Regardless of the CFIUS review, Nippon Steel still must reach an agreement with the United Steelworkers,” Boling said. “Without that, it’s very hard to see this deal happening.” The United Steelworkers Union, which vehemently opposes the deal, said on Tuesday “nothing has changed regarding the risks that Nippon’s acquisition would pose to national security or the critical supply chain concerns that have already been identified.” The deal is being closely watched in Japan, a close US ally and its biggest foreign investor. “Further strengthening economic relations, including expanding mutual investment between Japan and the US ... are essential for both countries,” Deputy Chief Cabinet Secretary Hiroshi Moriya told reporters on Wednesday. Nippon Steel shares were 1.1 per cent up in afternoon trade in Tokyo, while US Steel shares closed 0.4 per cent down on Tuesday.
CFIUS is concerned that Nippon Steel’s merger could hurt the supply of steel needed for critical transportation, construction, and agriculture projects, as stated in its August letter to the companies, exclusively obtained by Reuters. It also cited a global glut of cheap Chinese steel and said that under a Japanese company, US Steel would be less likely to seek tariffs on foreign steel importers. Nippon’s decisions could also “lead to a reduction in domestic steel production capacity,” it said. In a 100-page response letter to CFIUS, also exclusively obtained by Reuters, Nippon Steel said it will invest billions of dollars in US Steel facilities that otherwise would have been idled, “indisputably” allowing it to “maintain and potentially increase domestic steelmaking capacity in the United States.” The company also reaffirmed a promise not to transfer any US Steel production capacity or jobs outside the US and would not interfere in any of US Steel’s decisions on trade matters, including decisions to pursue trade measures under US law against unfair trade practices. The deal, Nippon added, would “create a stronger global competitor to China grounded in the close relationship between the United States and Japan.” Robust CFIUS reviews typically take 90 days, but it is common for companies to withdraw their filings and resubmit them to give them more time to address the panel’s concerns. According to CFIUS’s 2023 annual report, 18 per cent of companies seeking deal approval refiled their applications last year. Nippon Steel and US Steel filed for the review in March, and CFIUS allowed them to refile in June, starting a second 90-day clock that runs out on Sept. 23, Reuters reported on Friday. In December, CFIUS could approve the deal, possibly with measures to address national security concerns, recommend that the president block it, or extend the timetable again.
