Nippon Steel may have gotten the deal it wanted all along

Japan Times

9 hours ago

Nippon Steel has committed to spending more than $25 billion to buy United States Steel and make further investments into the storied American company, and even after all that — after buying 100% of the equity — it won't fully control the steelmaker.
In the transaction, the United States government will receive a golden share in the U.S. steelmaker, which will give it veto power over a number of activities and a degree of control over its board of directors.
The incredibly restrictive conditions, which are permanent, might have been accepted because they align with what the Japanese steelmaker was planning on doing all along; the conditions might not restrain the future parent at all.
Nippon Steel always said it would make a big investment into the company — about equal in size to the purchase price — as well as maintain domestic U.S. production capacity, keep the company's headquarters in Pittsburgh, Pennsylvania, and have a board in which the majority of the directors are American citizens.
That's about what the U.S. government will be requiring it to do.
Questions have also been raised about whether the national security requirements would pass legal muster if the U.S. government were to try to enforce the restrictions.
Takahide Kiuchi, executive economist at Nomura Research Institute, wrote in a report Monday that even though the golden share fix may constrain the post-acquisition management of U.S. Steel, much of it could be interpreted as symbolic.
'It is possible that Nippon Steel accepted them in the belief that these measures are largely symbolic, aimed at reassuring the American public and others who are wary of a foreign acquisition of U.S. Steel, and that their actual enforceability is limited,' Kiuchi wrote.
On Friday, U.S. President Donald Trump officially rolled back a January order issued by his predecessor that scotched the $14.9 billion deal on national security grounds. Trump is allowing the transaction to go ahead on the condition that a national security agreement is signed between the bidder and the U.S. government.
An executive order issued Friday by Trump maintained that the transaction could jeopardize U.S. national security, but added that these concerns could be successfully mitigated with a national security agreement.
The order provides few details on the terms of the agreement, but in a statement issued on Friday, the two companies said the national security agreement outlines approximately $11 billion in new investments by 2028, governance-related commitments that include a golden share to be issued to the U.S. government and commitments related to domestic production and trade matters.
The acquisition is being referred to as a "partnership" by the U.S. government and the companies themselves.
'With those approvals, all necessary regulatory approvals for the partnership have now been received, and the partnership is expected to be finalized promptly,' the companies said in the statement.
A rally by U.S. President Donald Trump in West Mifflin, Pennsylvania, on May 30. A golden share will give the U.S. government veto power over some corporate decisions at U.S. Steel after its acquisition by Nippon Steel. |
Reuters
U.S. Commerce Secretary Howard Lutnick, in a Sunday post on social media platform X, offered details about the terms of the golden share fix.
The special share, which Lutnick says will not sunset, will forbid certain corporate decisions without the president's approval, including relocating the company's headquarters from Pittsburgh, changing the company's name, transferring jobs or production outside the U.S., closing or idling plants barring safety concerns or upgrades, or reducing or delaying the investments that Nippon Steel had pledged.
'The golden share held by the United States in U.S. Steel has powerful terms that directly benefit and protect America, Pennsylvania, the great steelworkers of U.S. Steel and U.S. manufacturers that will have massively expanded access to domestically produced steel,' he wrote.
Unconfirmed reports have said the special share might give the president more authority than originally expected. The president will have the power to directly appoint one of the three independent directors on U.S. Steel's board, The New York Times reported on Sunday without naming the sources.
Trump publicly opposed the transaction during his presidential campaign, but later said he would support Nippon Steel's 'investment' in U.S. Steel instead of a takeover, and that U.S. Steel will 'remain U.S. controlled' after the transaction is completed.
For Nippon Steel — a company that sees market expansion in the Americas and Southeast Asia as key to its growth — acquiring U.S. Steel in its entirety has been a non-negotiable objective since Day 1.
Neither Lutnick nor Trump's presidential order outlined U.S. Steel's precise ownership structure after the transaction, but Japan's Nikkei and other news outlets reported that Nippon Steel will acquire 100% of U.S. Steel's regular shares, which falls in line with Nippon Steel's objective.
'There's no such thing as free technology. We're offering up all our advanced steel manufacturing know-how, so we can't make an investment without expecting a return,' Nippon Steel Vice Chairman and Executive Vice President Takahiro Mori was quoted as saying by Nikkei.
Friday's announcement was made ahead of Trump's meeting with Prime Minister Shigeru Ishiba during the annual Group of Seven gathering in western Canada beginning Monday, during which a preliminary trade deal could be signed.
Ishiba on Sunday called the approval of the U.S. Steel acquisition 'a symbolic case' of strengthened U.S.-Japan partnership.
A day earlier, trade minister Yoji Muto said in a written statement the Japanese government welcomes Trump's decision, as it views the investment as a way to strengthen the innovation capabilities of the steel industries in both countries and deepen their partnership.