Joe Biden set to voice concerns over Nippon Steel takeover of US Steel

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Joe Biden plans to intervene in Nippon Steel’s proposed purchase of US Steel, a move that could threaten the deal and anger Japan, one of Washington’s closest allies.

Biden will issue a statement expressing serious concern about the Japanese group’s proposed $14.9bn acquisition of the Pennsylvania-headquartered steelmaker before Prime Minister Fumio Kishida arrives for a state visit in Washington on April 10, according to six people familiar with the decision.

US officials and lawyers have drafted the statement and the White House has privately informed the Japanese government of the president’s decision, according to people familiar with the matter. US Steel’s shares fell more than 12 per cent after the Financial Times published details of Biden’s intentions.

The expression of concern will be interpreted as opposition to the takeover and marks the culmination of months of White House debate about how to respond to a deal that has sparked a bipartisan backlash in Washington against the sale of a US manufacturing icon to a foreign group.

Although US law gives the administration the power to block certain foreign acquisitions on national security grounds, Biden will not say outright that the deal should be blocked, according to people familiar with the matter.

Instead, they say he will issue similar comments to remarks made in December from White House by national economic adviser Lael Brainard, who said the president believed the deal deserved “serious scrutiny”.

Pennsylvania is a crucial electoral swing state in this year’s presidential election between Biden and Donald Trump. Both men have courted union votes in the state and Trump has already lashed out against Nippon Steel‘s “horrible” deal to buy the Pittsburgh-based American producer.

The United Steelworkers union, also based in Pittsburgh, has opposed the takeover.

Nippon Steel announced the controversial acquisition in December, leading Biden to pick a side between a powerful union and its voters, and a critical American ally. The president has invested heavily in shoring up alliances, particularly with Japan.

The White House asked US ambassador to Japan Rahm Emanuel to make the problem go away, putting him in a tough position after he had publicly welcomed the deal as “historic”. Emanuel did not respond to a request for comment.

One person familiar with the deliberations said it was “embarrassing” for an administration that talks about the importance of allies and particularly the US-Japan alliance to “send a signal of distrust regarding Japanese ownership of US companies” as Kishida prepares to visit.

“The president knows all this, but sadly it looks like election year politics will win out,” the person said.

The timing of Biden’s statement is significant because last week Nippon Steel filed its proposal with the Committee on Foreign Investment in the US (Cfius), the inter-agency panel that vets inbound investments for national security risks, according to two people familiar with the move. The company declined to confirm the Cfius filing.

“It is unprecedented for a president to make a substantive comment on a case that is pending before Cfius,” said Ivan Schlager, a partner at Kirkland & Ellis and one of the most prominent Cfius lawyers in the US.

“While Cfius is ordinarily immune to political pressure this case involves an iconic asset with unique capabilities coupled with an administration who has made protecting manufacturing and middle-class jobs the foundation of its foreign policy.”

The White House declined to comment on whether the president would intervene. The Japanese prime minister’s office also declined to comment.

News of Biden’s planned statement comes as he tours swing states such as Pennsylvania in a bid to shore up votes ahead of the election in November.

United Steelworkers president David McCall said last month that his union had “received personal assurances that Biden has our backs” in relation to the deal. Trump has also vowed to block the deal if he beats Biden in November.

Nippon Steel has hired US lobbying firm Akin Gump, focusing its energy to win the backing of the United Steelworkers.

But citing confidentiality reasons, the Japanese group was not in touch with the union before announcing the deal and it was only in late February that it signed a non-disclosure agreement with the group, which represents 850,000 US manufacturing workers. Experts in Washington said the company had made a serious mistake by not striking a deal with the union before announcing the deal.

Following talks with Nippon Steel last week, the United Steelworkers said the meeting yielded “no progress”. “We remain convinced that the company does not fully understand its obligations to steelworkers, retirees and our communities,” it said in a letter to its members.

Nippon Steel said in response that it would continue its talks with the union. “We provided the USW with specific commitments which we believe address each of the union’s concerns that have been raised,” it said.

A person with knowledge of Nippon Steel’s thinking said the company does not plan to give up its bid for US Steel even if Biden publicly expresses opposition to the takeover.

An executive told analysts in an earnings briefing last month the group did not expect any political intervention once a Cfius review had been launched.

Japan’s business community has been shocked by the strong reaction in Washington to the deal, especially since the US remains the most attractive mergers and acquisitions market for Japanese companies.

Nancy McLernon, head of the Global Business Alliance, a trade group that represents foreign multinationals in the US, said there was a “big risk” in blocking the acquisition on anything other than national security grounds. 

“It would have a material impact on the relationship with a critical ally. It’s worth noting that Japan is the largest foreign investor in the United States, directly employing nearly a million American workers. Blocking the deal under such pretence would certainly make for an awkward state dinner in April.”

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