Joe Biden blocks Nippon Steel’s $15 billion takeover of US Steel

US President Joe Biden has blocked a $15 billion deal by Japan’s Nippon Steel to buy US Steel, a setback for Washington’s ties with its closest Asia-Pacific ally and prompting the companies to face legal challenges to threaten steps.

Bidenwhich has long opposed the purchase, issued an order Friday requiring Nippon and US Steel to “completely and permanently abandon the proposed transaction within 30 days.”

In response, the two companies called the move “a clear violation of due process” and the law. Indicating possible legal action, they added: “Following President Biden’s decision, we are left with no choice but to take all appropriate measures to protect our legal rights.”

A clause in the original agreement with US Steel obliges Nippon to pay a $565 million break fee in the event the deal is blocked.

Biden’s extraordinary intervention, which comes just 17 days before the end of his term, is the capstone of a presidency in which he has sought to boost American jobs and moved away from the free trade agenda of previous administrations.

It is also likely to raise concerns about the U.S.’s receptiveness to future foreign investment, as President-elect Donald Trump, who won the November election on a protectionist agenda, also opposes the deal.

The companies said it was “shocking and deeply disturbing that the U.S. government….” . Treat an ally like Japan this way.”

They added: “Unfortunately, it sends a chilling message to any company based in a US-allied country that is considering making significant investments in the US.”

In the order, Biden said there was “credible evidence” that the acquisition could cause Nippon to “take actions that threaten to harm the national security of the United States.”

The Committee on Foreign Investment, which reviews foreign acquisitions, was unable to reach consensus as of Dec. 23 on whether the deal posed a risk Threat to national security.

The companies said the president had not presented “credible evidence of a national security issue,” adding that “the process was manipulated to advance President Biden’s political agenda rather than complying with the law.”

They added that the Cfius process was “deeply corrupted by politics and the outcome was predetermined.”

Biden’s intervention marks the failure of Nippon Steel’s ambitious expansion plan, which emerged as a sensitive political issue in a US election year.

The decision by the outgoing president, known for his support of organized labor, follows fierce opposition to the deal from the United Steelworkers union. The group’s campaign proved fatal to the purchase, despite intense lobbying by US Steel and Nippon executives in recent weeks.

The White House said Biden’s decision was not intended as a snub to Tokyo.

“This is not about Japan. “It’s about U.S. steel production,” National Security Council spokesman John Kirby said Friday. “It’s about keeping one of the largest steel producers in the United States under American ownership. It’s not about the extraordinary, close relationship, any alliance that we have with Japan.”

US Steel shares fell more than 6 percent after the decision.

Opponents of the takeover welcomed Biden’s decision.

Sherrod Brown, the outgoing Democratic senator from Ohio, wrote on X: “This deal…” . . posed a clear threat to America’s national and economic security and our ability to enforce our trade laws. That’s why we fought against it every step of the way. The president is right to block it.”

Biden’s move to scrap the deal will leave US Steel’s fate in limbo. The company had warned that it could close factories and reduce its workforce and possibly move its headquarters from Pittsburgh, Pennsylvania, if the deal was blocked.

Nippon’s proposed takeover attracted strong support in parts of the United States that would have benefited from the Japanese company’s promised investments and technology.

William Chou, deputy director of the Japan chair at the Hudson Institute think tank, said the decision would devastate steel-producing communities in western Pennsylvania and Indiana.

“President Biden talks about protecting the American steel industry, but only in the abstract,” he added. “At no time did he engage with real steelworkers or address the technology required to enable them to protect the steel industry.”

Japanese officials, speaking on condition of anonymity, previously said that while they understood the risk of political intervention that Nippon faced by making a bid in the run-up to the U.S. presidential election, they found it confusing that a Japanese company would be considered a security risk should be classified.

Heino Klinck, a former U.S. assistant secretary of defense for East Asia, said it was “ironic and nonsensical” that national security concerns were being cited as a justification for blocking the deal, since Japan hosted the world’s largest presence of U.S. military forces.

“This decision will cast a shadow on the alliance,” he said. “It is indeed unfortunate that the Biden administration has given the Chinese Communist Party yet another talking point about America not being a reliable partner.”

Additional reporting from Steff Chavez