(Bloomberg) -- US President Joe Biden’s decision to block Nippon Steel Corp.’s $14.1 billion takeover of United States Steel Corp. has sparked fresh uncertainty for the American icon that’s been at the heart of a domestic political firestorm in the US and fueled tensions with long-time diplomatic ally Japan. Biden announced his formal decision on Friday after the case was referred to him by a US security review panel and US Steel shares fell in response, trading well below Nippon Steel’s $55 per share offer for the firm, which traces its roots back to 1901 when J. Pierpont Morgan merged a collection of assets with Andrew Carnegie’s Carnegie Steel Co. There are a number of avenues the company might now go down to secure its future as Donald Trump prepares to take the reins of the US government from Biden. Here’s a look at what could happen.
Can Biden’s Decision Be Challenged?
It’s a high bar. US statute makes it clear that American presidents are granted the power to kill a deal they deem a threat to national security, and the codification of that law means it is unlikely to be an attractive case for the Supreme Court, were appeals to reach that level.
The Committee on Foreign Investment in the United States, a secretive panel that scrutinizes proposals by foreign entities to purchase companies or property in the US, was unable to reach a decision on the deal, sending it to the White House for final word.
However, US Steel and Nippon Steel might argue on procedural grounds. Cfius sent a letter to the companies in late August, saying that the deal posed a threat to national security. The companies intervened with a 100-plus page letter and a meeting in Washington with the Cfius panel, which granted an extension.
The chain of events was unusual. Companies are typically given a warning that a deal has problems that need mitigation, and then are given time to address those issues. In this case, there wasn’t the same warning time given, which could leave the door open for litigation. Though, it still may be a tough uphill climb to win a case.
What’s Next?
US Steel and Nippon Steel on Friday issued a joint statement saying that Biden’s move “reflects a clear violation of due process and the law governing Cfius,” and that the companies “will take all appropriate action to protect their legal rights.”
“We believe that President Biden has sacrificed the future of American steelworkers for his own political agenda,” the statement said. “We are committed to taking all appropriate action to protect our legal rights to allow us to deliver the agreed upon value of $55.00 per share for U.S. Steel’s stockholders upon closing.”
Bloomberg News previously reported that US Steel and Nippon Steel were likely to jointly file lawsuits related to the deal. While it’s not clear exactly what the lawsuits will look like, they would probably challenge various parties that the companies believed worked against the best interests of their shareholders.
What Were Some of the Reactions?
Pennsylvania Governor Josh Shapiro, a Democrat who didn’t publicly advocate for or against the deal, issued a muted statement, saying he expects “any other potential buyers to demonstrate the strong commitments to capital investment and protecting and growing Pennsylvania jobs that Nippon Steel placed on the table.” He called on US Steel to refrain from threatening the jobs of current union workers and keep the headquarters in the state.
“This matter is far from over – we must find a long-term solution that protects the future of steelmaking in Western Pennsylvania and the workers who built U.S. Steel and built this country,” he said.
JPMorgan Analyst Bill Peterson wrote in note that there are “limited avenues moving forward” as foreign ownership for US Steel is “seemingly off the table.”
“Despite Japan being both a close ally and the largest foreign investor in the US, we view the deal’s demise as a clear deterrent for foreign entrants interested in buying entry into the US steel market,” Peterson wrote.
Are There Break Fees?
Nippon Steel’s deal to buy US Steel included a $565 million break fee for the American company. And, yes, it still must be paid despite the transaction being killed by the government.
What Does the Blocked Deal Mean for US-Japan Relations?
The deal is a strain on ties with a key ally — and one crucial in the US race against China. Japan’s previous prime minister, hosted by Biden earlier this year as the issue swirled, had largely distanced himself from the tensions. The decision also sends a message that no US ally or industry is immune to a potential national security investigation, and it’s a sign of a continued bipartisan move to treat steel as a strategic sector.
Some experts have warned of a chilling effect for foreign companies looking to acquire US assets, given that the fees — legal, banking and others — might be enough to dissuade competitive offers from non-US bidders who may not want to risk going through a process that could end up empty handed.
President-elect Donald Trump said in a Truth Social post that he would fast track approval for any country will to invest $1 billion inside US borders. But Trump has also said he would have also blocked Nippon Steel’s bid amid worries over the steelmaker being foreign owned.
What Other Options Can US Steel Pursue?
Beyond legal actions, there will be other options for US Steel’s board to evaluate. It will likely re-consider whether to sell all or parts of the company.
Cleveland-Cliffs offered a losing bid last year for $54 per share in cash and stock, which was broadly as seen as inferior to the all-cash $55 per share offer Nippon Steel put in. But it’s unclear if Cleveland-Cliffs or other bidders are ready to come back to the table.
The board may also consider splitting the company into parts, which was discussed during the bidding process in 2023. That option would likely mean a split between legacy assets and newer facilities.
Of course, there’s a scenario where US Steel doesn’t put anything on the selling block and goes back to the way it was operating before the saga began.
But Chief Executive Officer David Burritt had warned that if the deal with Nippon Steel were to fall through that US Steel might need to shutter plants and consider moving its headquarters, currently in Pittsburgh. That would all be contingent on board approval.
What’s Does This Mean for the Steel Union?
Biden’s decision is a significant win for David McCall, president of United Steelworkers. McCall had been staunchly critical of the deal from the day it was announced and successfully earned the support of Biden early on in the saga. The question remains how the union’s rank-and-file members, many of whom supported the takeover, will feel about McCall and his leadership team’s relentless push against Nippon Steel’s bid.
In a statement Friday, the United Steelworkers said Biden’s decision was “the right move for our members and our national security.”
What’s Next for Nippon Steel?
The takeover would have made Nippon Steel the world’s No. 3 steelmaker, with the transaction aimed at reducing its dependence on the waning Japanese market and helping it compete with the big mills in China. Now, Nippon Steel could bolster efforts in other growth markets. Analysts have pointed to India as one possibility.
©2025 Bloomberg L.P.