Doj Weighing Antitrust Probe Of Us Steel Takeover

The sale of U.S. Steel to its Japanese rival Nippon Steel is being scrutinized by the Justice Department over potential antitrust concerns, according to three people with knowledge of the matter.

The $14.1 billion deal has drawn fire from lawmakers, unions and others who argue the storied U.S. industrial titan should not be owned by a foreign company — even one based in Japan, one of America’s closest allies. President Joe Biden on Thursday echoed that in a highly unusual statement, saying it must “remain an American steel company that is domestically owned and operated.”

The United Steelworkers union — whom Biden and presumptive Republican presidential nominee Donald Trump are both courting on the campaign trail — opposes the deal, saying it puts U.S. jobs at risk.

The antitrust scrutiny is separate from concerns about U.S. Steel’s potential foreign ownership and is focused on a large manufacturing plant in Calvert, Alabama, jointly owned by Nippon Steel and Luxembourg-based ArcelorMittal. That plant competes directly with U.S. Steel, particularly for automotive customers. DOJ attorneys have reached out to industry participants in recent weeks, asking questions about how the joint venture would compete with a combined Nippon Steel and U.S. Steel, said the people, who were granted anonymity to discuss a confidential matter.

The review is currently in a preliminary stage. The DOJ has not yet opened a formal, in-depth review, and could ultimately decide against it, two of the people said. A decision is likely to be made later this month.

Cleveland-Cliffs, ArcelorMittal and U.S. Steel are three of the largest suppliers to the auto sector. U.S. Steel previously rejected a takeover from Cleveland-Cliffs, in part over fears that it would not withstand an antitrust review.

If the Nippon deal goes through as is, the Japanese company would outright own one major auto supplier as well as half of another smaller one. And in addition to limiting head-to-head competition, Nippon would also have access to ArcelorMittal’s sensitive commercial information while competing with it at the same time.

The primary hurdle to the deal however, remains a recently started review by the Committee on Foreign Investment in the U.S., an interagency panel helmed by the Treasury Department that evaluates mergers and other investments by non-U.S. interests. The panel is primarily focused on countries like China and Saudi Arabia, but U.S. Steel’s importance to the American industrial base has led to concerns about it being foreign-owned.

There’s a simple fix for the antitrust issue tee’d up by the joint venture, however, two of the people said: Nippon could agree to sell its 50 percent stake to ArcelorMittal. It couldn’t be learned if those discussions are underway, and the companies declined to comment.

“No other U.S. steel company on its own can meet this challenge while also meeting antitrust requirements,” Nippon Steel said in a statement last week after Biden’s comments.

U.S. Steel declined to comment, but in a securities filing in February it said, “we are confident that our transaction is good for competition, good for our customers, and will easily pass antitrust review.”

ArcelorMittal did not respond to a request for comment. A DOJ spokesperson declined to comment.

The success of the deal is ultimately not going to rise or fall on antitrust concerns, the people said. However, a lengthy investigation would add uncertainty.

Biden’s statement Thursday opposing the deal highlights the political dilemma the administration faces as it reviews the sale of an iconic American firm during election season. While steel workers are a sought-after voting bloc for both parties, the administration is also wary of alienating Japan, a key trade partner and national security ally.

Trump has already come out in opposition to the deal, saying he would block it on his first day back in office.

The Japanese government, which has lobbied for the sale, says that it feels election year politics are at the heart of Biden’s statement, POLITICO previously reported.

“As long as the [U.S.] is in a campaign, we see a huge difficulty out there” in completing the deal, said a Japanese government official, granted anonymity to discuss the pending deal, “although the company is trying so hard.”

Biden’s statement, itself, does not kill the deal, and the White House has not indicated that Biden would seek to directly intervene in that ongoing process.

Even so, any eventual decision from the Committee on Foreign Investment in the U.S. will have to go back to the White House for review, so Biden’s statement could indicate that he will view any agreement that comes out of CFIUS harshly.

The Japanese government, however, remains hopeful that if Nippon can come to an agreement with the union, opposition from the White House could soften.

Nippon “is really committed to sincere talks with USW to resolve this conundrum,” said the Japanese official, “and they will not easily give up, we believe.”

Gavin Bade contributed to this report.