Nippon Steel finalises takeover of US Steel

Nippon Steel and US Steel said they have finalised their “historic partnership”, a deal that gives the United States government a say in some matters and comes a year and a half after the Japanese company first proposed its nearly US$15-billion buyout of the iconic American steelmaker.

The pursuit by Nippon Steel for the Pittsburgh-based company was buffeted by national security concerns and presidential politics in a premier battleground state, dragging out the transaction for more than a year after US Steel shareholders approved it.

It also forced Nippon Steel to expand the deal, including adding a so-called “golden share” provision that gives the federal government the power to appoint a board member and a say in company decisions that affect domestic steel production and competition with overseas producers.

“Together, Nippon Steel and US Steel will be a world-leading steelmaker, with best-in-class technologies and manufacturing capabilities,” the companies said on Wednesday.

The combined company will become the world’s fourth-largest steelmaker in an industry dominated by the Chinese, and bring what analysts say is Nippon Steel’s top-notch technology to US Steel’s antiquated steelmaking processes, plus a commitment to invest US$11 billion to upgrade US Steel facilities.

In exchange, Nippon Steel gets access to a robust US Steel market, strengthened in recent years by tariffs under President Donald Trump and former President Joe Biden, analysts say.

Anthony Rapa, a Blank Rome lawyer in Washington who advises firms on trade, operations and investments, said the government’s intervention in the Nippon Steel-US Steel deal is another sign of a trend that the United States is increasingly equating economic security with national security.

He doesn’t see the government’s intervention as chilling foreign investment and said a ‘golden share’ mechanism — to the extent it’s used again by the US to ease national security concerns — is likely to emerge only in sensitive and complex cases.

Still, the episode could cause investors to be more strategic in how they approach transactions, Rapa said.

Anil Khurana, executive director of the Baratta Center for Global Business at Georgetown University, said the US government’s interest in the deal is a sign of the growing importance it places on economic competition with China.

“Clearly, the definition of what is national security has expanded to included national economic security, which is where I think this comes in,” Khurana said.

Nippon Steel and US Steel did not release a copy of the national security agreement struck with Trump’s administration.

But in a statement on Wednesday, the companies said the federal government will have the right to appoint an independent director and get “consent rights” on specific matters.

Those include reductions in Nippon Steel’s capital commitments in the national security agreement; changing US Steel’s name and headquarters; closing or idling US Steel’s plants; transferring production or jobs outside of the US; buying competing businesses in the US; and certain decisions on trade, labour and sourcing outside the US.

Nippon Steel announced in December 2023 that it planned to buy the steel producer for US$14.9 billion in cash and debt, and committed to keep the US Steel name and Pittsburgh headquarters.

The United Steelworkers union, which represents some US Steel employees, opposed the deal, and Biden and Trump both vowed from the campaign trail to block it.

After he was elected, Trump changed course, expressing openness to working out an arrangement and ordering another review by the committee.

That’s when the idea of the ‘golden share’ emerged as a way to resolve national security concerns and protect American interests in domestic steel production.

As it sought to win over American officials, Nippon Steel began adding commitments.

In the final agreement, it pledged to produce and supply US Steel from domestic sources — such as mining operations in Minnesota — and to allow US Steel to pursue trade actions under US law.

It also made a series of bigger capital commitments in US Steel facilities, tallying US$11 billion through to 2028, it said.

Nippon Steel said its annual crude steel production capacity is expected to reach 86 million tons, closer to its goal of 100 million tons.

AP