Joe Biden prepares to block Nippon Steel’s takeover of US Steel

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President Joe Biden is set to block Nippon Steel’s purchase of US Steel after his administration concluded the $14.9 billion deal posed a national security risk that could not be mitigated by the US and Japanese groups.

Several people familiar with the matter said the White House would block the acquisition of the Pittsburgh group on national security grounds.

Biden’s decision, which is expected in the coming days, comes as Democratic presidential candidate Kamala Harris ramps up her campaign for blue-collar votes in Pennsylvania, a swing state that could decide November’s U.S. election.

Speaking in Pennsylvania on Monday, Harris said the iconic US steelmaker should remain “American-owned and American-operated”, echoing the position Biden took after Nippon disclosed the deal last year.

Although Biden has expressed opposition to the deal, it has been reviewed by the Committee on Foreign Investment in the US, the government group led by the Treasury that screens incoming deals for national security threats.

Two people familiar with the case said Cfius recently informed Nippon Steel that the deal raised national security concerns that could not be overcome.

The timing of the announcement to block the deal remains unclear, but Harris will travel to Pittsburgh for a rally on Thursday. She and Republican candidate Donald Trump, who also opposes the Nippon Steel takeover, will take part in a presidential debate in Philadelphia next week.

Shares of US Steel fell sharply on news of Biden’s planned intervention, falling 22%, or $7.75, to $27.85 in afternoon trading, compared with the $55 per share value of Nippon Steel’s offer in December.

Earlier on Wednesday, US Steel warned that thousands of jobs were “at risk” in Pennsylvania if the acquisition fell through, adding that the lack of a deal would raise “serious questions” about keeping the Pittsburgh site.

The Treasury declined to comment. The White House did not comment on whether Biden would block the deal, but an official said: “Cfius has not made a recommendation to the president and this is the next step in that process.”

Nippon Steel said in a statement: “Nippon Steel has not received any update related to the Cfius lawsuit. From the beginning of the regulatory review process, we have been clear with the administration that we do not believe this transaction creates national security concerns.” It added: “Nippon Steel strongly believes that the US government should properly handle the proceedings in this matter in accordance with the law.”

The Biden administration hopes the decision will boost support among union workers in Pennsylvania, where Harris and Trump are running neck-and-neck. Trump said he would block the deal “immediately” if he wins the election. The Trump campaign did not respond to a request for comment.

The Biden administration has previously described Nippon’s proposed acquisition as a security risk, which many foreign policy experts and some administration officials have privately derided. Japan is America’s most important ally in the Indo-Pacific and has worked closely with Washington on a number of efforts to counter China.

“Unfortunately, both sides of the aisle seem to see blocking this deal as a smart political move in an election year,” said Nancy McLernon, head of the Global Business Alliance, which represents US foreign multinationals. “However, it is the workers of Pennsylvania, and ultimately the country, who will pay the price for this short-sighted stance.”

The deal was opposed by several Democratic and Republican lawmakers in Pennsylvania and by Sherrod Brown, an influential Democratic senator from Ohio, where US Steel also has operations. Brown faces a close fight for re-election in November.

“This puts a premium on anticipating the political risk associated with high-profile assets and developing a comprehensive strategy up front, as political pressure can fundamentally change outcomes,” said Ivan Schlager, veteran Cfius attorney and partner at Kirkland & Ellis.

US Steel shareholders approved the deal earlier this year. In addition to the Cfius review, the US Department of Justice is conducting an antitrust review of the deal’s implications for US industry.