US Steel stock plunges amid Biden’s likely veto of Nippon Steel purchase

US Steel shares plummeted on Wednesday on the stock exchange following a report published by The Washington Post which claimed that US President Joe Biden is preparing to veto the purchase of the company by the Japanese group Nippon Steel in the short term. The president’s political opposition to the operation is no secret, since he has announced and reiterated it in public, but some investors seemed to trust that it would fade after the elections on November 5. The published news, however, speaks of an imminent veto, although it has not been confirmed by the White House. After that, the company’s shares have closed the session with a fall of 17.5%, to $29.38 per share, after marking their lowest point in more than a year, at $26.92.

Nippon Steel announced a friendly takeover bid at a price of $55 per share, 87% above the current price. This difference clearly indicates that the market does not believe the deal will go ahead. The price is still well below what it was when the Japanese company presented its offer in December, valued at around $14.9 billion. Biden already caused another collapse in the share price in March, when he first clearly expressed his opposition to the deal.

The deal is under review by the Committee on Foreign Investment in the United States (CFIUS), which is part of the Treasury Department. It has the power to approve, block or modify the deal on national security grounds, or refer it to the president with its recommendations for a decision. The latter scenario seems the most likely, and Biden is preparing to veto it, although he has not yet received the report.

The operation is opposed not only by Biden, but also by the vice president and Democratic presidential candidate, Kamala Harris, and by her rival in the elections, the Republican Donald Trump. This protectionist unanimity regarding an iconic and century-old company puts the viability of the operation at risk, especially before the elections, despite the fact that Japan is a strategic ally and the union of both companies would allow them to better compete with Chinese steel companies. The unions have also expressed their opposition.

Nippon Steel has been trying to make commitments to try to overcome political and union resistance to the takeover. On Wednesday, the company said that key managers and the majority of the board of directors would be Americans if the deal was successful. The Japanese group has also made a commitment to give priority to US Steel production to meet the demand of the American steel market and has promised multi-billion dollar investments.

He also assured that no US Steel production capacity or jobs would be transferred outside the United States, that there would be no layoffs, plant closures or plant downtime as a result of the operation and that technology would be transferred from the Japanese group to the American one. He also offered guarantees regarding trade policy.

The latest to show her opposition to the deal was Harris, who at an event with unions this week in Pittsburgh, said: “US Steel is a historic American company, and it is vital to our nation to maintain strong American steel companies. And I couldn’t agree more with President Biden: US Steel must remain American-owned and operated.”

Some US Steel employees, however, decided to rally at the company’s Pittsburgh headquarters on Wednesday in support of the transaction. The employees are calling on elected officials in Pennsylvania and across the country to recognize the significant benefits of the deal for employees, communities, customers and the American steel industry.

“Today’s demonstration is intended to show support for the transaction with Nippon Steel. We want elected leaders and other key decision makers to recognize the benefits of the transaction, as well as the inevitable consequences of its failure,” said David B. Burritt, the company’s president and chief executive officer. through a statement.

Without the deal, the company says thousands of good-paying union jobs would be at risk, “negatively impacting numerous communities where its facilities are located, and depriving the American steel industry of an opportunity to better compete on the global stage.” “The lack of an agreement with Nippon Steel raises serious questions about the permanence of US Steel in Pittsburgh. The departure of US Steel, a company that has been making steel in the Mon Valley since 1901, would deprive the Pittsburgh area of ​​jobs, tax revenue and community contributions,” the company added.

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