Nippon Steel and U.S. Steel on Monday filed a federal lawsuit contesting President Joe Biden's decision to block a nearly $15 billion acquisition deal that would have seen the Japanese giant take over Pittsburgh-based steelmaker, accusing the U.S. administration of "illegal interference."
The lawsuit asked the court to set aside the review process of the Committee on Foreign Investment in the U.S. and Biden's order, citing "violation of the Constitutional guarantee of due process and statutory procedural requirements, as well as unlawful political influence."
The case, in which the two companies accused Biden of blocking the $14.9 billion deal "for purely political reasons," was filed in the U.S. Court of Appeals for the District of Columbia Circuit.
"From the outset of the process, both Nippon Steel and U. S. Steel have engaged in good faith with all parties to underscore how the Transaction will enhance, not threaten, United States national security, including by revitalizing communities that rely on American steel, bolstering the American steel supply chain, and strengthening America's domestic steel industry against the threat from China," the companies said in a prepared statement Monday.
"Nippon Steel is the only partner both willing and able to make the necessary investments."
Nippon Steel had promised to invest $2.7 billion in U.S. Steel's aging blast furnace operations in Gary, Indiana and Pennsylvania's Mon Valley. It also vowed not to reduce production capacity in the United States over the next decade without first getting U.S. government approval.
Biden on Friday decided to stop the Nippon takeover – after federal regulators deadlocked on whether to approve it – because "a strong domestically owned and operated steel industry represents an essential national security priority ... Without domestic steel production and domestic steelworkers, our nation is less strong and less secure," he said in a statement.
While administration officials have said the decision was unrelated to Japan's relationship with the U.S. – this is the first time a U.S. president has blocked a merger between a U.S. and Japanese firm.
Biden departs the White House in just a few weeks.
The president's decision to block the deal comes after the Committee on Foreign Investment in the United States, known as CFIUS, failed to reach a consensus on the possible national security risks of the deal last month and sent a long-awaited report on the merger to Biden. He had 15 days to reach a final decision.
In a separate lawsuit filed in the U.S. District Court for the Western District of Pennsylvania, the companies accused steel-making rival Cleveland-Cliffs Inc. and its CEO, Lourenco Goncalves, of "engaging in a coordinated series of anti-competitive and racketeering activities" to block the deal.
In 2023, before U.S. Steel accepted the buyout offer from Nippon, Cleveland-Cliffs offered to buy U.S. Steel for $7 billion. U.S. Steel turned down the offer and later accepted a nearly $15 billion all-cash offer from Nippon Steel, which is the deal that Biden nixed Friday.
The companies allege that Goncalves, in collusion with the U.S. Steelworkers, maneuvered to prevent any party other than Cleveland-Cliffs from acquiring U.S. Steel and to damage the Pittsburgh manufacturer's ability to compete.
Political and union resistance to the deal had amplified in recent months. Biden and President-elect Donald Trump, who is set to take office later this month, had opposed the deal.
The White House had urged for scrutiny of the agreement, given U.S. Steel's core role in producing a material that is critical to national security.
The move drew sharp criticism from both companies and Tokyo.
Japanese Prime Minister Shigeru Ishiba on Monday called on Washington to clarify why the deal was blocked, warning that the decision had sparked worries over future Japanese investments in the world's largest economy.
"It is unfortunately true that there are concerns being raised within Japan's industrial world over future Japan-U.S. investment," Ishiba told reporters.
"It's something we have to take seriously."
U.S. Steel had warned that a failure to conclude a deal would put thousands of U.S. union jobs at risk and had also signaled it would close some steel mills. It also said it could potentially move its headquarters out of the politically important state of Pennsylvania.
Despite the opposition, U.S. Steel shareholders overwhelmingly voted in April last year to approve the acquisition.
The two companies have also worked to address concerns over the combination. Nippon offered to move its U.S. headquarters to Pittsburgh, where U.S. Steel is based and promised to honor all agreements in place between U.S. Steel and the powerful United Steelworkers union.
However, the opposition has proved to be an overhang on the stock. Shares of U.S. Steel failed to hit the offer price of $55 per share, signaling investor worries over the timeline of the deal's completion.
U.S. Steel, founded in 1901 by some of the biggest U.S. magnates, including Andrew Carnegie, J.P. Morgan and Charles Schwab, became intertwined with the industrial recovery following the Great Depression and World War II.
The company has been under pressure following several quarters of falling revenue and profit, making it an attractive takeover target for rivals looking to expand their U.S. market share.
