The Iron Price — U.S. Steel and Nippon Steel Sue After Their Merger Is Blocked

$14.9 billion is a lot of money. This tidy sum is part of what promises to be bitterly fought legal actions brought by two companies who had their proposed merger blocked by the Biden Administration. U.S. Steel and Nippon Steel claim their deal was scuttled for political reasons during an election year. The government argues that their concerns were based on national security concerns.

As allegations begin to fly back and forth, examining the basics of the lawsuits can help present a clearer picture of what's involved. And no, that's not a typo. The steel companies have filed multiple lawsuits against defendants, including U.S. Attorney General Merrick Garland, Treasury Secretary Janet Yellen, and rival steel company Cleveland-Cliffs. As is often the case in disagreements of this magnitude, each side has a different take on what happened.

No Means No

All business deals that may compromise national security due to foreign interests are subject to review by the Committee on Foreign Investment in the United States (CFIUS), part of the Department of the Treasury. Executive Order 14083, issued in 2022, expanded what factors CFIUS could consider when making decisions and recommendations.

In this instance, Biden voiced his opposition to the merger before the CFIUS review began. The plaintiffs allege this was done to curry favor with the United Steelworkers (USW) union. The president of the USW, David McCall, was also against the proposed merger. The USW is headquartered in Pennsylvania, a crucial swing state in presidential elections.

The ensuing CFIUS review could not reach a consensus on whether or not the deal threatened national security. This non-committal allowed Biden to exercise the executive authority to suspend or prohibit a foreign investment deemed a threat to national security. After Biden nixed the deal on January 3rd, 2025, the companies quickly responded by filing lawsuits in federal court.

The first lawsuit calls for the court to overturn Biden's decision, claiming he influenced the decision-making process of CFIUS and that they received no feedback on their plans to safeguard national security concerns. It also names U.S. Attorney General Merrick Garland and Treasury Secretary Janet Yellen.

A second lawsuit targets USW President McCall, a steel company called Cleveland-Cliffs, and their CEO Lourenco Goncalves for interfering with the deal. It claims that the defendants colluded to help Cleveland-Cliff monopolize the steel market. Cleveland-Cliffs had submitted an unsuccessful bid to purchase U.S. Steel.

A Deal Forged

U.S. Steel was formed in 1901 by J.P. Morgan, who financed the merger of several large steel companies. This included the Carnegie Steel Company, owned by Andrew Carnegie. It went on to become the largest steel producer and the largest corporation in the world.

Recent years have shown declining revenue and profit as U.S. Steel slipped to the twenty-fourth largest steel producer in the world. Nippon Steel struck a deal to acquire U.S. Steel in December of 2023.

The companies have claimed that the CFIUS review process was "deeply corrupted" by politics, producing an unfair and predetermined result. According to the potential partners, Nippon Steel made voluntary and proactive concessions to any concerns CFIUS might have had. These included:

• The majority of the board of directors of U. S. Steel would be composed of U.S. citizens
• CFIUS could approve three independent directors
• Important positions including CEO and CFO would be U.S. citizens
• Nippon Steel would not be involved in any trade measures proposed by U. S. Steel
• The transfer of any production and jobs outside the U.S. would be forbidden
• Production capacity at U. S. Steel’s facilities in Alabama, Arkansas, Indiana, Pennsylvania, and Texas could not be reduced for ten years without CFIUS approval
• Regular national security agreement compliance status reports to CFIUS
• Allowing CFIUS to have an observer over the board of directors

The plaintiffs claim they received no feedback from CFIUS on their proposal. They allege this is due to Biden's influence.

A Matter for the Courts

If the plaintiffs believe they might get a better result from the incoming administration, their hopes might be misplaced. Citing his threatened tariffs, President-elect Donald J. Trump has questioned why U.S. Steel would still want to sell. However, the likelihood that Trump will move to replace Yellen as Treasury Secretary might cause a change in CFIUS' stance.

Cases involving CFIUS are rare and chances are there's no quick resolution on the horizon. No doubt Nippon Steel and U.S. Steel will continue to work toward hammering out a deal acceptable for all sides.

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