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The stories that matter on money and politics in the race for the White House
US Steel’s shares said it all about its takeover by Japan’s Nippon Steel: the $15bn deal never truly stood a chance. At no point since the transaction was announced in December has the stock got near the $55-a-share offer price. Wednesday’s news that President Joe Biden will block the deal dashed any lingering hopes that money might beat politics. Not in a swing state in an election year.
Investors must hope that this is a political exception, rather than the new rule. The all-cash blowout offer for Pittsburgh, Pennsylvania-headquartered US Steel, approved by shareholders in April, will be blocked on national security grounds, the Financial Times reported. The timing is not yet known. Nor are the exact grounds on which American security is threatened by a bid involving one of its very closest allies.
The deal partners tried hard to alleviate concerns. Nippon Steel just a week ago boosted investment plans that would have extended the life of two US plants. US Steel earlier on Wednesday warned that without the deal, thousands of jobs were at risk as well as its 123-year presence in Pittsburgh — home since its founding by Andrew Carnegie, the original robber baron.
Yet the United Steelworkers union was unswayed, having been opposed from the start, as were presidential hopefuls Donald Trump and Kamala Harris.
Of course, politics is not new to the US steel industry, nor is it always a hindrance. Since Trump introduced tariffs in 2018, US Steel’s ebitda has virtually tripled compared with the six years before. Other US steelmakers have seen similar gains. In May, Biden visited the USW’s Pittsburgh headquarters to call for higher tariffs on Chinese steel.
What next for US Steel? Shares fell as much as 20 per cent on Wednesday, pushing them back below the $35 per share offered last August by rival Cleveland-Cliffs. That all-American cash-and-shares tie-up came with USW support. But in combining two of the country’s top four steelmakers, it posed far more significant antitrust issues.
For dealmakers and investors, the hope must be that steel is a special case. US Steel’s shares did not get close to the bid price following Cleveland-Cliff’s offer either, suggesting investors were sceptical it could pass muster by the competition watchdogs.
But at least an antitrust fight involves case law and courts that can be challenged, rather than facing the fuzzier, emotional concept of national security. If that is the new standard to navigate — even for staunch allies — it is not just steel deals that will suffer.
