US Steel, Nippon executives court Trump officials in bid to salvage deal

Presidents can veto foreign takeovers on national security grounds but rarely do — rarer yet when the proposed sale is to an ally and the company in question doesn’t hold crucial military contracts. This deal has become a litmus test for thorny political questions about union labor, China, and defense readiness.

Biden blocked the deal on national security grounds following the election, fulfilling a campaign promise seen as an effort to win union support. Trump, who has made reviving American manufacturing a key priority, pledged to block the deal as well, but hasn’t issued any further executive orders. He did say at Feb. 7 joint press conference with Japan’s prime minister that Nippon would invest in the Pittsburgh-based company rather than buy it outright.

Both companies are also suing the US government, a union leader and another rival steel CEO over the deal’s failure. The deal’s failure would open the door for that rival US steel maker, Cleveland-Cliffs, to return with a potentially less valuable offer.

This is a strong contender for “weirdest deal of the decade,” and will doubtless be a great talking point for cross-border M&A specialists trying to get hired. On a micro level, there’s something puzzling about trying to get a meeting with Trump’s lieutenants, rather than making their case directly to the President. But more broadly, this is not how deals are supposed to die.

Take a look at the merger of Kroger and Albertsons: The deal collapsed, and the two sides sued each other — not a rival, or a union boss, or the government. Or look to Broadcom’s pursuit of Qualcomm: An executive order simply killed it.

Here, Nippon (with the support of the Japanese government) are nodding along as Trump declares the deal dead, then proceeding as though they expect it to be completed. The reality distortion field is helped by US Steel’s stock price, which has remained elevated. Arbitrageurs who piled in at roughly $50 a share are reluctant to sell at the current price of $38.

Nippon owes US Steel a big breakup fee should the deal fall apart, so whether or not it thinks the deal will actually close, it has $565 million reasons to keep pushing. And its efforts may not be a totally lost cause: Trump has shown he can be lobbied to a 180° shift (see: TikTok) and there are no shortage of politically connected fixers, investors and lobbyists in and around this deal.