Acquisition of U.S. Steel Approved

The U.S. President Donald Trump signed an executive order which would approve acquisition of U.S. Steel by Nippon Steel with some conditions. The conditions oblige both companies to abide by a National Security Agreement (NSA), exchanged with the U.S. government and to give the government a “golden share” to reserve a grip on those companies. Having 100 percent of common stock of U.S. Steel, it was reported in Japan that Nippon Steel was successful in that acquisition bid. 

Former President Joe Biden ordered prohibition of Nippon Steel’s acquisition with a concern that the transaction would threaten national security of the U.S. in January. Trump issued a memorandum in April ordering the Committee on Foreign Investment in the United States (CFIUS) to review Biden’s order. Nippon Steel, with U.S. Steel, has been requesting Trump administration to approve the deal of purchasing with 100 percent acquisition of U.S. Steel’s share for 14.1 trillion dollar.

 

Trump’s executive order amended Biden’s January order by adding conditions which demanded the Nippon Steel to remain in compliance with the submitted NSA. In the statement on presidential approval, Nippon Steel announced that the companies have entered into an NSA with the U.S. government, thanking the president of his “bold leadership and strong support” for the partnership between them. The NSA provides that 11 billion in new investments will be made by 2028.

 

According to the statement of Nippon Steel, the NSA also includes “commitments related to governance (including a Golden Share to be issued to the U.S. Government), domestic production, and trade matters.” Golden share is a kind of classified stock which gives government the right of decisive vote in a shareholder meeting. “We have a golden share, which I control, or the president controls,” said Trump the day before issuing the executive order, insisting that the Americans would have 51 percent ownership of U.S. Steel.

 

The biggest gain for Nippon Steel is 100 percent acquisition which the company has been seeking from the beginning. Trump administration raised tariff on imported steel from 25 percent to 50 percent earlier this month. Nippon Steel hopes to expand the share of steel in the United States with advantage to foreign products. The company believes that the deal will improve its business that has been affected by overproduction of steel by China.

 

There still remains a possibility that the veto power of U.S. government will restrict business activities. While it is still unclear to what extent the government will intervene the management of U.S. Steel, Nippon Steel will have to consult with U.S. administration on some important decisions. The great amount of investment offered by Nippon Steel may also have negative impact on its management.

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