How Nippon Steel won conditional approval for $14.1 billion purchase of US Steel, explained.
In a seeming conclusion to a long drawn merger bid, Nippon Steel has won conditional approval from the Donald Trump administration for its $14.1 billion purchase of United States Steel Corporation.
In a statement last week, the Japanese steelmaker said that they have 'committed' to a national security agreement proposed by the US government. The merger includes $55/share deal and will create one of the world's largest steel companies.
It added that regualtory approvals have been received and 'the partnership is expected to be finalised promptly.' The deal is expected to close by June 18, according to a report by Nikkei, without citing a source for the date. Nippon has pledged to invest an additional $11 billion in the US by 2028, including an initial commitment in a greenfield project that would be completed after 2028, Bloomberg reported.
The company will also spend an extra $3 billion after 2028 for a new steel mill, the BB report said, citing sources. This would take the total extra investment to $14 billion (in addition to purchase price).
The conditional approval came after Donald Trump 'opened the door' by giving the companies an agreement and amending former US President Joe Biden's executive order blocking the merger. In a written statement, Japan's Minister of Economy, Trade and Industry, Yoji Muto said, 'The Japanese government believes that this investment will strengthen the ability of the Japanese and US steel industries to generate new innovation and lead to the strengthening of the close partnership between Japan and the US. We welcome the decision of the US government.'
The US Steel sale to Nippon Steel has thus been cleared, subject to compliance with US government terms, the report added.
In a written statement, White House spokesman Kush Desai said: 'President Trump promised to protect American Steel and American Jobs — and he has delivered on that promise. Today's executive order ensures US Steel will remain in the great Commonwealth of Pennsylvania, and be safeguarded as a critical element of America's national and economic security.'
Notably, this is a reversal from Donald Trump, who along with Joe Biden and Kamala Harris had campaigned against the deal before the 2024 US Presidential elections.
Notably, one of Donald Trump's conditions for backing the deal, includes the US government holding a so-called 'golden share' in the merged company. Both Nippon and US Steel have confirmed that the US would get a golden share, what exactly this entails, was unclear. One source told BB, the golden share does not include an equity stake in the company for the government.
Usually, a golden share means that the holder (the US government in this case), get veto vote over certain changes the companies might want to make, the Bloomberg report noted.
In a social media post, US Commerce Secretary Howard Lutnick said the golden share would allow the US to prevent Nippon Steel from moving the company out of Pittsburgh, change the name of US Steel, or close plants in the US without their consent.
The new agreement also includes security terms that give the US government 'significant and unprecedented control measures', such as control over some board seats and requirements that some leadership roles go to American citizens, sources told Bloomberg.
The text of the security agreement has not been released, but Donald Trump had previously hinted that some caveats include a requirement to keep existing blast furnaces running for a decade, bonuses to steelworkers, and government veto power to retain control over the US Steel board.
(With inputs from Bloomberg)
Key Takeaways The merger will create a major player in the global steel market, enhancing competition with existing US firms.
The US government retains significant control through a 'golden share,' allowing it to influence corporate decisions.
This acquisition reflects broader trade negotiations between the US and Japan amidst changing political landscapes.
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