President Trump’s mixed signals and political theatrics complicate a landmark cross-border acquisition and raise red flags for foreign firms.
The year-and-a-half-long saga of Nippon Steel Corp.’s bid to buy U.S. Steel took another twist late last month when President Trump unexpectedly announced via social media post a “blockbuster agreement” to finally conclude the deal. But if we’re now in the final act of the drama, that was just Scene 1.
Scene 2 came and went on June 6, when Trump missed what was supposed to be a deadline to approve or reject a deal. Scene 3 is now expected before June 18, the date by which the two companies agreed to complete the deal—unless they decide to extend it.
Whether the final curtain in this cliffhanger drama gets extended yet again is still to be known. Meanwhile, interested parties from steelworkers and their families to U.S. Steel stockholders to Pennsylvania elected officials are pondering an assortment of critical but still up-in-the-air details. And other non-US companies are picking up some cautionary lessons about seeking US acquisitions in the Trump era.
With an executive order in January, outgoing President Joe Biden had blocked the U.S. Steel sale, which would have been one of the largest US acquisitions ever by a Japanese company, on national security grounds. Then in April, in a highly unusual move, Trump ordered the Committee on Foreign Investment in the United States to try again to make a recommendation on a Nippon Steel and U.S. Steel tie-up. CFIUS had failed to agree on a recommendation last fall and kicked the decision up to the Biden White House.
Trump received the committee’s recommendation on May 21, giving him 15 days—until June 6—to decide to overturn Biden’s executive order. He didn’t, although his social media post, and statements made at a rally at U.S. Steel’s nearly 90-year-old Mon Valley Works–Irvin Plant outside Pittsburgh,indicated he was prepared to do so.
Instead, the White House claimed he had only asked CFIUS for guidance, not a recommendation, and that the real deadline is June 18. Biden, in his executive order, had given Nippon Steel and U.S. Steel until then to abandon their deal, which means that to push it through, they must conclude it by that date.
What the president didn’t do was backtrack on his claim that a historic deal was within reach.
U.S. Steel will continue to be “controlled by the USA,” he declared at the rally; “otherwise, I wouldn’t have done the deal,” which he claimed to have brokered. Nippon Steel would plow $14 billion into its new properties, amounting to essentially the entire purchase price, including $2.2 billion to increase steel production in Mons Valley and another $7 billion for modernizing plants in other parts of the country, creating at least 70,000 jobs. Further, there would be no layoffs and the new owner would keep all current blast furnaces in full operation for at least 10 years.
“You’re not going to have to worry about that,” the president assured a community that has depended upon U.S. Steel for generations. “They’re going to be here a lot longer than that.”
Stakeholders Left Scratching Their Heads
Trump’s pronouncement left steelworkers, shareholders, analysts, and even Nippon Steel executives trying to tie up some important loose ends, however. Published reports indicated that the acquisition price of $55 per share that the two companies shook hands on in December 2023 was unchanged, and that the deal would still be a 100% acquisition, as Nippon Steel had always preferred: not an “investment,” as Trump earlier suggested.
But the biggest mystery involves the actual control structure the deal would put in place at U.S. Steel.
Republican Sen. David McCormick of Pennsylvania told reporters following Trump’s remarks that the company will continue to have an American CEO and an American-majority board of directors and that the US government will hold a “golden share,” meaning it will have the right to approve some of the board members. That in turn “will allow the United States to ensure production levels aren’t cut and things like that,” he said.
No material terms have emerged from the closely guarded Nippon Steel-U.S. Steel talks as to how this mechanism would be set up, however.
A “golden share” generally means a block of shares that lets the party holding them outvote all other shareholders. But such arrangements, while common in Germany and some other parts of Europe, are “not typical” in foreign acquisitions of US companies, notes Antonia Tzenova, leader of the CFIUS and Industrial Security Team at law firm Holland & Knight, and are generally resisted by the acquirer.
If the parties have something other than a classic golden share in mind, they have not disclosed it—and that constitutes an additional mystery. Trump said that he had not yet seen a formal deal, despite his having received a report on it from CFIUS. If a new deal has been agreed to, Tzinova points out, U.S. Steel has a legal obligation to reveal it to its shareholders.
And to the United Steelworkers, which represent U.S. Steel employees, union officials say.
“Neither President Trump nor Senator McCormick have offered any detail concerning the ‘planned partnership’ or the nature of ‘control by the USA’ of U.S. Steel following the closing of a transaction,” a union official said in a memo to the company—even though those details could affect U.S. Steel’s contract with the union.
Hard Lessons For Foreign Corporations
The two companies have pursued the sale doggedly for a year and a half; as if to underscore the urgency for a Japanese producer of acquiring U.S. operations, Trump announced shortly after his remarks in Mons Valley that Washington would be doubling tariffs on imported steel. But pushing through even a deal that makes economic sense is more difficult in the present era, Tzinova says.
Nothing about Nippon Steel’s initial proposal to buy U.S. Steel was very unusual, she notes, just its timing. Coming when a presidential election cycle was already under way, the deal quickly became a political issue. The lesson for non-US acquirers: avoid announcing a deal during an election year.
But Nippon Steel could have helped its cause, Tzinova adds, if it had lobbied more heavily and reached out more expansively to all the stakeholders involved. Those stakeholders would include the union and its members, local businesses for whom U.S. Steel is an economic anchor, and state governments. United Steelworkers President David McCall noted pointedly after Trump’s remarks that the union, which strongly opposed the sale, had not been included in the two companies’ discussions with the administration.
That’s another lesson non-US investors will have to learn going forward, Tzinova advises.
