Biden says U.S. Steel must remain domestically owned and operated

]The logos of Nippon Steel Corp. are didplayed at the company headquarters in Tokyo, Japan March 18, 2019. Picture taken March 18, 2019. REUTERS/Yuka Obayashi/File photo

WASHINGTON — U.S. Steel Corp, which has agreed to be bought by Japan’s Nippon Steel for $14.9 billion, must remain a domestically owned and operated American firm, President Joe Biden said on Thursday, opposing the proposed merger.

The United States needs to “maintain strong American steel companies powered by American steelworkers,” Biden said.

“U.S. Steel has been an iconic American steel company for more than a century, and it is vital for it to remain an American steel company that is domestically owned and operated,” the president added in a statement.

Shares of U.S. Steel tumbled 6.4 percent to end at $38.26 on Thursday. The company was not immediately available for comment.

READ: Japan’s Nippon Steel to buy U.S. Steel in $14.9-B deal

Biden called United Steelworkers International (USW) President David McCall on Thursday “to reiterate that he has the steelworkers’ back,” the White House said. The union welcomed Biden’s position.

National security concerns

“Allowing one of our nation’s largest steel manufacturers to be purchased by a foreign-owned corporation leaves us vulnerable when it comes to meeting both our defense and critical infrastructure needs,” McCall said in a statement. “The president’s statements should end the debate: U.S. Steel must remain ‘domestically owned and operated.'”

Biden, who is running for re-election this year, has courted unions as a key constituent of political support. McCall expressed appreciation in his statement for the Democratic president’s “unfailing support.”

The issue has the potential to overshadow an April 10 summit between Biden and Japanese Prime Minister Fumio Kishida aimed at boosting the long-standing security alliance between their countries in the face of growing Chinese influence.

It was not immediately clear whether Biden would use any U.S regulatory authorities to scuttle the deal.

The Committee on Foreign Investment in the United States (CFIUS), a powerful panel that reviews foreign investments in U.S. companies, has met with the parties to discuss the deal, a person familiar with the matter said.

The committee could recommend that the president block it over national security concerns.

“The CFIUS review process is an independent analysis … free from political interests unrelated to national security,” said Tatiana Sullivan, a CFIUS lawyer with Skadden, Arps, Slate, Meagher & Flom LLP.

Scrutiny

“It would be unusual for the President to prejudice that process with his thoughts before CFIUS has concluded their review,” she added.

A January filing showed Nippon Steel assuaged U.S. Steel’s concerns that the deal might not survive CFIUS scrutiny by committing to “all actions required” to obtaining committee clearance, and to paying U.S. Steel a $565 million breakup fee if it failed to do so.

The White House had said Nippon Steel’s proposed acquisition deserved “serious scrutiny” after some U.S. lawmakers said the deal threatens the supply of steel and jobs in the United States.

The Treasury Department, which leads CFIUS, did not immediately respond to a request for comment, and the White House declined to comment on whether Biden planned to use its powers to block the deal.

Nippon Steel clinched a deal to buy the American steelmaker for a hefty premium in December, betting that U.S. Steel would benefit from the spending and tax incentives in Biden’s infrastructure bill.

“There are always complications when foreign companies look to buy U.S.-based corporations, and this deal is no different,” said Art Hogan, chief market strategist at B Riley Wealth in New York.

“In an election year, it will be a heavy lift to get all the stakeholders comfortable with the acquisition of a U.S. manufacturing icon,” Hogan added.