Lawsuit filed by Nippon Steel, U.S. Steel.

Washington Steel Merger Challenge

WASHINGTON –

Nippon Steel and U.S. Steel filed a federal lawsuit challenging a Biden administration decision to block Nippon’s proposed US$15 billion acquisition of the Pittsburgh company and said that the head of the Steelworkers union and a rival steelmaker worked together to scuttle the buyout.

Biden said Friday that U.S. companies producing a large amount of steel should not be foreign owned because of potential security issues, though Japan, where Nippon is based, is a strong ally.

Lawsuits and Allegations

In separate lawsuits filed Monday in the U.S. Court of Appeals for the District of Columbia and the U.S. District Court for the Western District of Pennsylvania, the steelmakers allege that it was a political decision made by the Biden administration that had no rational legal basis.

“Nippon Steel and U. S. Steel have engaged in good faith with all parties to underscore how the Transaction will enhance, not threaten, United States national security, including by revitalizing communities that rely on American steel, bolstering the American steel supply chain, and strengthening America’s domestic steel industry against the threat from China,” the companies said in a prepared statement Monday.

Nippon Steel had promised to invest US$2.7 billion in U.S. Steel’s aging blast furnace operations in Gary, Indiana, and Pennsylvania’s Mon Valley. It also vowed not to reduce production capacity in the United States over the next decade without first getting U.S. government approval.

President Biden’s Decision

Biden on Friday decided to stop the Nippon takeover — after federal regulators deadlocked on whether to approve it — because “a strong domestically owned and operated steel industry represents an essential national security priority. … Without domestic steel production and domestic steel workers, our nation is less strong and less secure,” he said in a statement.

While administration officials have said the decision was unrelated to Japan’s relationship with the U.S. — this is the first time a U.S. president has blocked a merger between a U.S. and Japanese firm.

Anticompetitive Allegations

In a separate lawsuit filed in the U.S. District Court for the Western District of Pennsylvania on the same day, the companies accused steel-making rival Cleveland-Cliffs Inc. and its CEO, Lourenco Goncalves, in coordination with David McCall, the head of the U.S. Steelworkers union, of “engaging in a coordinated series of anticompetitive and racketeering activities” to block the deal.

In 2023 before U.S. Steel accepted the buyout offer from Nippon, Cleveland-Cliffs offered to buy U.S. Steel for US$7 billion. U.S. Steel turned down the offer and later accepted a nearly $15 billion all-cash offer from Nippon Steel, which is the deal that Biden nixed Friday.

CFIUS Review and Allegations

The companies allege that Goncalves, in collusion with the U.S. Steelworkers, manoeuvred to prevent any party other than Cleveland-Cliffs from acquiring U.S. Steel and to damage the Pittsburgh manufacturer’s ability to compete.

Neither the Steelworkers nor Ohio’s Ohio’s Cleveland-Cliffs responded immediately to requests by The Associated Press for comment.

Political Interference Allegations

The companies said in the lawsuit that they submitted three draft national security agreements to CFIUS in the fall to address any concerns.

The companies said in their lawsuit that CFIUS was told not to offer any counterproposals or hold discussions with them. Nippon and US Steel argue that the review process was manipulated so that the outcome would support a decision they say Biden had already made.

The companies said that President Biden used “undue influence to advance his political agenda.”

Future Outlook

Nippon, however, will face an incoming administration that has also vowed to block the deal.

President-elect Donald Trump last month underscored his intention to block the deal, and pledged to use tax incentives and tariffs to strengthen the iconic American steelmaker.

Shortly after the lawsuits were filed, Trump cemented that stance on his Truth Social platform.

“Why would they want to sell U.S. Steel now when Tariffs will make it a much more profitable and valuable company?” the post said. “Wouldn’t it be nice to have U.S. Steel, once the greatest company in the World, lead the charge toward greatness again? It can all happen very quickly!”

Shares of United States Steel Corp. rose four per cent before the opening bell Monday.