Nippon Steel’s mega-deal starts to unravel
Nippon Steel’s political tug-of-war
US Steel chief executive David Burritt threw an unexpected hail-mary pass on Wednesday as he tried to breathe life into one of the worst-timed deals of the past decade.
Burritt, who is attempting to keep the company’s $14.9bn sale to Nippon Steel alive, warned thousands of jobs in the election battleground state of Pennsylvania would be put at risk if the takeover wasn’t approved.
“We want elected leaders and other key decision makers to recognise the benefits of the deal as well as the unavoidable consequences if the deal fails,” he said.
It’s a risky gambit to make a nearly $15bn deal an election issue and one that could easily backfire. Pennsylvania, as most Americans know, could very well decide the US election this November.
Both vice-president Kamala Harris and former president Donald Trump have come out against the deal, which also faces intense opposition from the United Steelworkers, one of the most powerful unions in the US.
Harris on Monday said the Pittsburgh-based company should remain “American owned and American operated” while on the campaign trail. Trump has said he would “immediately” block the deal if he wins.
The takeover has been in purgatory since it was announced last December, and it’s unclear how Burritt’s push this week changes the calculus for either the Harris or Trump campaigns.
But a potentially fatal blow arrived later Wednesday, with the FT reporting that President Joe Biden intended to block the acquisition after concluding it posed a national security risk that couldn’t be overcome, said several people familiar with the matter.
That’s surely a painful development for both companies (and the small army of advisers who have toiled away on the merger for months). Nippon Steel was advised by Citigroup, while US Steel was advised by Goldman Sachs and Barclays.
Lucrative advisory fees for the banks are at risk (even as the law firms involved are likely billing large sums for the work they’re doing on the US national security review).
It’s unclear who advised Burritt to raise the stakes with politicians — he threw a rally outside one of US Steel’s plants on Wednesday — but he has gotten some poor guidance already.
Deal documents show one of US Steel’s advisers, the Washington-based powerhouse Covington & Burling, told the company it “did not anticipate that any of those transactions would implicate unresolvable national security concerns based on the identity of the counterparties”.