Dj Steel Deal Sent To Biden

Al Root

The deal for Nippon Steel to buy U.S. Steel for $55 a share in cash, and invest billions into the U.S., is in its death throes after a key U.S. review couldn't reach a definitive conclusion about National security.

Monday, The Washington Post reported that the Treasury Department's Committee on Foreign Investment in the U.S., of CFIUS, couldn't reach an decision on Nippon's proposed takeover and referred the case to President Biden to decide.

CFIUS reviews deals "to determine the effect of such transactions on the national security of the United States."

President Biden, President-elect Trump, and several other politicians have come out against the deal. The failure of CFIUS to say one way or another if the deal was a threat is another nail in its coffin.

CFIUS and the Treasury Department didn't immediately respond to a request for comment.

CFIUS won't say it but we will. There is no National Security concern with a U.S. Steel and Nippon tie-up. Japan is an ally. Their money would be used to enhance American steelmaking assets. What's more, the design and making of steel isn't a mystery to any country and hasn't been for roughly a century. Russian entities have been allowed to buy American steel assets in the past. Evraz owns facilities in Oregon and Colorado.

"The transaction between U.S. Steel and Nippon Steel enhances U.S. national and economic security through investment in manufacturing and innovation — by a company based in one of the United States' closest allies," said U.S. Steel in an emailed statement. "This is a transaction that should be approved on its merits, and one that should be a model for 'friendshoring' investment. It is the best way, by far, to ensure that U.S. Steel, including its employees, communities, and customers, will thrive well into the future."

Most political opposition to the deal referenced American psychology or the idea that America needed to make its own steel. The steel mills, of course, weren't moving, and Nippon — the world's fourth-largest steel producer — committed to investing billions that U.S. Steel doesn't have to improve operations. U.S. Steel is the third-largest steel maker in the U.S. and ranks in the mid-20s globally.

What's most likely now is the deal will die and investors will be left wondering if Cleveland-Cliffs will come back to the table. An August 2023 Cliffs' cash and stock bid worth roughly $35 a share kicked off this process. Cliffs won't have to match Nippon's offer.

If no deal emerges, U.S. Steel will need higher steel prices from an improving industrial economy to see higher earnings in the coming years. Benchmark steel prices are about $700 a metric ton today. They averaged closer to $1,000 a ton in 2023 and $1,100 a ton in 2022.

U.S. Steel stock was down 1.1% at $31.03 in early trading, while the S&P 500 was up 0.4% and the Dow Jones Industrial Average had ticked up 0.1%.

Coming into Tuesday trading, U.S. Steel stock was down about 36% year to date. Most of that decline came in February when President Biden came out against the Nippon deal.

Write to Al Root at allen.root@dowjones.com

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