U.S. President Joe Biden plans to express concern about Nippon Steel Corp.’s proposed $14.9 billion takeover of U.S. Steel Corp., a person familiar with the matter said on Wednesday, sending the U.S. company’s shares lower on bets that the deal could face greater political opposition. down nearly 13%.
The issue threatens to overshadow an April 10 summit between Biden and Japanese Prime Minister Fumio Kishida, which is aimed at strengthening the long-term security alliance between the two countries amid China’s growing power.
Nippon Steel paid a premium for the iconic 122-year-old U.S. steelmaker in December, betting that U.S. Steel would benefit from spending and tax breaks in Biden’s infrastructure bill.
However, several U.S. Democratic and Republican senators criticized the deal, citing national security concerns or questioning why the companies did not consult U.S. Steel’s main union before announcing it.
Donald Trump, Biden’s rival in November’s US presidential election, has said he would block a takeover of US Steel if elected. The White House said in December that the deal needed to be scrutinized given U.S. Steel’s central role in producing materials critical to national security.
The White House declined to comment on Wednesday, but a person familiar with the matter said Biden will make a statement about the planned acquisition before Kishida arrives for a state visit.
U.S. officials and lawyers drafted the statement, and the White House has privately notified the Japanese government of Biden’s decision, according to the Financial Times, which first reported the news.
Top Japanese government spokesman Hayashi Masaru declined to comment on the report. “The Japan-U.S. alliance is stronger than ever and the two countries will continue to cooperate in economic security,” Chief Cabinet Secretary Hayashi told reporters on Thursday, echoing recent comments by Japanese officials.
Matthew Goodman, a trade and economics expert at the Council on Foreign Relations think tank in Washington, said the issue could overshadow the summit and cause damage to Kishida, who is already troubled politically at home.
“The Japanese prime minister has to demonstrate that he is not only in control of the relationship with the United States but is strengthening it,” Goodman said. “So to the extent that it goes against the domestic political narrative, that’s problematic. of.”
Goodman said he considered the acquisition’s risk to U.S. national security “suspicious” and that questioning an investment from a so-called trusted security partner could seriously damage the relationship.
“In an election year, this is more about politics, with both nominees appealing to the support of steelworkers and unions,” he said of Biden and Trump.
Nippon Steel and U.S. Steel said in a joint statement that they welcomed the Biden administration’s review of the deal because “an objective and comprehensive review of the deal will demonstrate that it strengthens U.S. jobs, competition, and the economy.” and national security.”
Goodman said the United States has long been concerned about Japan’s labor practices and “does not support unionization by workers at Japanese-owned steel plants in the United States.”
The companies said they have “active, focused discussions with the United Steelworkers that are ongoing.”
US Steel was founded in 1901 by American giants such as Andrew Carnegie, JP Morgan and Charles Schwab, and was closely related to the Great Depression and the aftermath of World War II. Industrial recovery is closely linked.
Last year, the Pittsburgh-based company launched a formal review of its strategic options after rejecting a takeover bid from steelmaker Cleveland-Cliffs.
The company’s shares are under pressure after several quarters of declining revenue and profits, making it an attractive takeover target for rivals seeking to acquire a steelmaker for the auto industry.
U.S. Steel shares closed down 12.8% at $40.86 on Wednesday, well below Nippon’s offer of $55 per share.
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