FT : Playing the M&A Trump card & Activistist coming for Europe
Steel groups cry foul and bet on Trump
Nippon Steel has spent more than a year playing nice.
The Japanese group’s executives have courted Washington power-players and dined alongside Pennsylvania steelworkers in far-flung towns, all with one goal: to garner support for the company’s $15bn deal to buy US Steel.
But it’s now become a legal battle. They have sued President Joe Biden for allegedly blocking the transaction in exchange for union support in the swing state of Pennsylvania during last year’s election.
They’re betting Donald Trump and his incoming administration will approve their deal, even though he has repeatedly said he would block it.
What triggered the abrupt shift? Biden officially blocked the deal last Friday, citing national security concerns, after months of indicating he wanted the company to remain American-owned.
But Nippon and US Steel aren’t walking away from their merger.
Although Trump has vowed to block the deal, he’s notoriously mercurial, and has changed his mind on high-profile commercial issues before, such as banning TikTok.
Now, by suing Biden, the companies hope to be granted a do-over of the national security review by the Committee on Foreign Investment in the US, which couldn’t come to a decision by the December 23 deadline.
The two steelmakers are positioning themselves to benefit if Trump changes his mind.
“You could see a scenario where president Trump doesn’t want to defend the corrupt practices of his predecessor,” said a person familiar with the litigation. “In that scenario, this deal shouldn’t even end up on the president’s desk.”
But the companies face a time crunch. In his order blocking the deal last week, Biden stipulated they had 30 days to abandon the deal. The companies are hoping that either Cfius or the court will grant them more time to fight for the deal’s survival.
Europe, brace for the activists
Brace for impact: as European economies navigate political instability, slowing growth and unpredictable geopolitics, activist investors are gearing up to be even bolder and louder in 2025.
Some 86 per cent of corporates expect activism to tick up in 2025, according to a new study by top law firm Skadden Arps, with just under half expecting that increase to be “significant” — double the expectation from last year.
This follows years of consistent increases in the number of campaigns in Europe and a trend towards going public earlier, ratcheting up the pressure on boards.
Activists see Italian companies as most ripe for the picking, followed by the UK, Germany and France, according to Skadden.
While technology, media and telecoms were seen as offering the most opportunities in 2024, industrials are expected to be the big target in activists’ sights in 2025 — a major change from last year, when the sector was ranked fifth.
That prediction comes as Europe’s carmaking supply chains, for instance, are expected to continue to suffer this year.
“If you have different activists telling you . . . we’re going to target mainly industries and chemicals, it helps those companies to get prepared,” Armand Grumberg, the head of Skadden’s European M&A practice, told DD.
He added that while European companies previously lagged behind UK counterparts on planning to defend against activists “preparedness is now much, much higher than it used to be”.
Mid-sized companies with market value of €1bn to €2bn were also increasingly targeted in 2024. “When we speak to our mid-sized company clients, they say: ‘we’re not so much on the radar’. Well, guess what? You’re going to be,” he said.
That’s not to say all is smooth sailing for activists.
Bluebell Capital Partners — which made waves targeting oil company BP, pharmaceutical company GSK and yoghurt maker Danone — closed its activist hedge fund in December after struggling to raise funds.
And Paul Singer’s feared activist hedge fund Elliott Management has lost a string of top staff in its London office since autumn 2023, including star fund manager Nabeel Bhanji, who is decamping to Citadel.
But for European companies with vulnerabilities such as governance issues or non-core businesses creating drag: watch out.