U.S. Steel Shareholders Approve Sale to Japan’s Nippon Steel
The $14.1 billion deal still faces regulatory reviews, opposition from United Steelworkers union, members of Congress
United States Steel shareholders approved the sale of the storied company to Japan’s Nippon Steel 5401 -0.36%decrease; red down pointing triangle, in the midst of union opposition and ongoing regulatory reviews that are raising doubts about the $14.1 billion deal.
U.S. Steel shareholders’ X -2.13%decrease; red down pointing triangle approval of the deal was widely expected. Investors are in line to receive $55 in cash for each of their U.S. Steel shares—more than double U.S. Steel’s stock price last August when the company disclosed that it was considering offers.
U.S. Steel said that investors representing 71% of the company’s shares voted on the deal, and of the shares voted, 98% supported the sale. Roughly 29% of shares weren’t voted.
“The overwhelming support from our stockholders is a clear endorsement that they recognize the compelling rationale for our transaction,” said David Burritt, U.S. Steel’s chief executive.
Takahiro Mori, Nippon Steel’s vice chairman who negotiated the deal, said Friday’s vote was a significant step toward completing the acquisition. “From the outset, our goal has been clear—to protect and grow U.S. Steel in the U.S. market,” he said.
U.S. Steel’s stock has been trading well below the purchase price, reflecting investors’ anxiety about the remaining hurdles for the deal to close. The shares declined 2.1% Friday to close at $41.33.
The Pittsburgh-based company selected Nippon Steel over a lower cash and stock offer from U.S. Steel’s main domestic rival, Cleveland-Cliffs. The Tokyo-based company is the world’s fourth-largest steelmaker and has pledged to use its deep pockets and production technology honed at its Japanese mills to upgrade U.S. Steel’s aging plants.
Nippon Steel has told the United Steelworkers union it is willing to invest $1.4 billion to improve equipment at U.S. Steel’s older plants, some of which have operated for more than a century. But Nippon Steel’s promises so far have done little to alleviate opposition that flared immediately after the companies announced their deal in December.
The union, which represents about 10,000 hourly U.S. Steel hourly workers, has said it doubts that Nippon Steel is committed to maintaining U.S. Steel’s contract with the union and dismissed the company’s pledges to refrain from layoffs and plant closings as meaningless gestures.
The union said Friday that U.S. Steel executives and shareholders voting for the deal gave priority to their own financial gains over the company’s employees and retirees. “Thankfully, the vote isn’t the end of the story: The decision ultimately isn’t simply up to shareholders and executives,” the union said.
President Biden has said he is opposed to foreign-ownership of U.S. Steel, but hasn’t said explicitly that he would block the deal. Democratic and Republican lawmakers have called for the deal to be blocked, arguing that allowing a foreign-owned company—even from a close U.S. ally in Japan—could undermine U.S. national security if steel is needed for defense purposes.
“If you do reach a true national security emergency, we have substantially less leverage over a Japanese firm than an American firm,” Ohio Republican Sen. J.D. Vance said in an interview this week.
U.S. Steel has said it doesn’t produce steel for military equipment. Most of the company’s sales come from supplying sheet steel to the auto, appliance and construction industries.
The Justice Department is reviewing the merger for market-concentration concerns. Nippon Steel operates a handful of businesses in the U.S. that process steel or produce finished goods with steel. The department recently asked for more information on Nippon Steel’s partnership with steelmaking giant ArcelorMittal in an Alabama steel mill, according to people familiar with the matter. That mill supplies steel to some of the same industries as U.S. Steel.
U.S. Steel considered Nippon Steel’s lack of steel production plants in the U.S. as an advantage over other companies’ bids for the company, including Cleveland-Cliffs, which U.S. Steel’s lawyers warned would likely face a difficult antitrust review. Cleveland-Cliffs and U.S. Steel are the only domestic suppliers of iron ore used to make steel and the dominant producers of automotive steel and steel used in electric-vehicle motors.
The Nippon Steel deal is also under a national-security review by the Committee on Foreign Investment in the U.S. The Treasury Department-led committee of government agencies is expected to take months to complete an investigation of potential national security aspects of the deal.
The committee can recommend that the president block a deal, but it usually prescribes remedies to address potential national-security risks.
The 123-year-old U.S. Steel is one of the oldest continually operated public companies in the U.S. This year’s presidential election has heightened interest in the deal as Biden and former President Donald Trump jostle for votes from steelworkers and other blue-collar workers in battleground states with large manufacturing workforces. The United Steelworkers union last month endorsed Biden for re-election shortly after he came out against the deal.
The White House has framed Biden’s opposition to the deal as mostly about supporting U.S. Steel workers. Biden said Wednesday during remarks with Japan’s Prime Minister Fumio Kishida at the White House that he is committed to American workers, and said he is committed to America’s alliance with Japan.
Kishida, speaking at the same event, reminded the U.S. to adhere to procedures based on law in evaluating the deal. Kishida said that Japanese businesses in the U.S. already employ nearly 1 million people.
“Investment from Japan to the U.S. can only increase upwards in the months and years to come,” he said.
Opponents of the deal have questioned whether Nippon Steel’s business interests in Japan will compromise its management of U.S. Steel. The steelworkers union this week lambasted Nippon Steel for asking the International Trade Commission to lift long-lasting U.S. tariffs on tin-plate from Japan.
Cleveland-Cliffs and U.S. Steel, the only steelmakers in the U.S. that produce the tin-coated steel used in food cans and jar lids, have laid off hundreds of workers and idled tin-plate production in recent years. Cleveland-Cliffs attributed its February decision to close its Weirton, W.Va., tin-plate mill this month to lower-cost imports.
“We are now seeing further evidence that Nippon Steel will continue to prioritize its Japanese operations at the expense of U.S. workers,” the union said. “Nippon must not be allowed to acquire U.S. Steel facilities.”
Nippon had no immediate comment.