US president Donald Trump approved Japanese steelmaker Nippon Steel's $15bn acquisition plan of US Steel in his executive order that reversed his predecessor's decision to block the deal, the Whitehouse announced late on 13 June.
The threat to national security for the US arising as a result of the deal can be adequately mitigated by entering into a National Security Agreement (NSA) with Nippon and US Steel, Trump said in a statement. Former US president Joe Biden on 3 January rejected the proposed merger plan, citing national security concerns with a Japanese firm owning a major US steel maker.
The firms signed the NSA with the US government yesterday, following Trump's executive order, Nippon Steel told Argus, leaving no major obstacles to proceed with the transaction.
"We thank President Trump and his Administration for their bold leadership and strong support for our historic partnership. This partnership will bring a massive investment," the firms said.
The partnership means an acquisition of US Steel, the representative of Nippon Steel who spoke to Argus reiterated, rejecting speculation that the approved investment plan does not entail a merger bid.
Nippon Steel will make a $11bn investment in US Steel by 2028 as part of the requirements by the NSA, according to the Japanese firm. It will start investing in the US this year after necessary regulatory approvals were granted, the company told Argus.
The Japanese steel producer will also issue a "golden share" to the US government as required under the NSA, according to the White House. A "golden share" typically grants its holder the right to veto decisions by the firm's board members or its majority shareholders.
But Nippon Steel told Argus that the company freedomto run US Steel is guaranteed, rejecting speculation that the US government would retain full control of the business. A "golden share" can take a variety of forms, the representative told Argus, although the Japanese firm did not disclose if the White House is granted veto power.
The Trump's executive order is likely to settle the 18-month approval process that faced a number of challenges including legal action by the firms against the Biden administration and opposition to the deal by the United Steelworkers (USW) union.
Nippon Steel persists in the US market because it is the most prominent steel market among the advanced economies with robust demand for high quality steel products, said Eiji Hashimoto, chief executive of Nippon Steel in January. The acquisition of US Steel is the only promising solution to strengthen the steel industries in both countries, Hashimoto added.
The Japanese steelmaker and US Steel agreed on the acquisition in part because the collaboration would enhance US Steel's ability to serve automobile, construction and other industries including emerging energy transition sectors, according to the firms. Nippon Steel is among the top producers of electrical steel essential to electric vehicles production, according to the Japanese producer.
Nippon Steel is targeting India, the US and southeast Asia as strategic regions to achieve 100mn t/yr of crude steel production globally as part of its mid- to long-term strategy.
