President Joe Biden believes “serious scrutiny” is warranted for the planned acquisition of U.S. Steel by Japan’s Nippon Steel, the White House said Thursday after days of silence on a transaction that has drawn alarm from the steelworkers union.
Lael Brainard, the director of the National Economic Council, indicated the deal would be reviewed by the secretive Committee on Foreign Investment in the United States, which she participates in and includes economic and national security agency representatives to investigate national security risks from foreign investments in American firms.
She said in a statement that Biden “believes the purchase of this iconic American-owned company by a foreign entity — even one from a close ally — appears to deserve serious scrutiny in terms of its potential impact on national security and supply chain reliability.”
“This looks like the type of transaction that the interagency Committee on Foreign Investment Congress empowered and the Biden administration strengthened is set up to carefully investigate,” she said. “This administration will be ready to look carefully at the findings of any such investigation and to act if appropriate.”
Under the terms of the approximately $14.1 billion all-cash deal announced Monday, U.S. Steel will keep its name and its headquarters in Pittsburgh, where it was founded in 1901 by J.P. Morgan and Andrew Carnegie. It will become a subsidiary of Nippon.
The combined company will be among the top three steel-producing companies in the world, according to 2022 figures from the World Steel Association.
Chaired by Treasury Secretary Janet Yellen, the CFIUS screens business deals between U.S. firms and foreign investors and can block sales or force parties to change the terms of an agreement for the purpose of protecting national security.
The committee’s powers were significantly expanded in 2018 through an act of Congress called the Foreign Investment Risk Review Modernization Act, known as FIRRMA. In September, President Biden issued an executive order that expands the factors that the committee should consider when reviewing deals — such as how the deal impacts the U.S. supply chain or risks to Americans’ sensitive personal data. It has on some occasions forced foreign companies to divest their ownership in American firms.
In 2020 Beijing Kunlun, a Chinese mobile video game company, agreed to sell gay dating app Grindr after it received an order from CFIUS.
United Steelworkers International, which endorsed Biden’s 2020 presidential campaign, swiftly opposed the new transaction.
The union “remained open throughout this process to working with U.S. Steel to keep this iconic American company domestically owned and operated, but instead it chose to push aside the concerns of its dedicated workforce and sell to a foreign-owned company,” said David McCall, president of United Steelworkers, in a statement after the transaction was announced, adding that the union wasn’t consulted in advance of the announcement.
“We also will strongly urge government regulators to carefully scrutinize this acquisition and determine if the proposed transaction serves the national security interests of the United States and benefits workers,” he added.
Political allies of Biden in Pennsylvania — a presidential battleground state that is critical to his reelection campaign — also objected to the sale this week, and released statements pressing Nippon to make commitments to keep U.S. Steel’s workers, plants and headquarters in the state.
Some also described it as the latest example of profit-hungry executives selling out American workers to a foreign company.
Democratic U.S. Sen. Bob Casey said it appeared to be a “bad deal” for the state and workers, while Democratic U.S. Sen. John Fetterman — who lives across the street from U.S. Steel’s Edgar Thompson plant just outside Pittsburgh — said he will attempt to prevent the sale based on national security issues.
“It’s absolutely outrageous that U.S. Steel has agreed to sell themselves to a foreign company,” Fetterman said.
Speaking on the condition of anonymity to discuss the committee, a Treasury spokesperson said: “CFIUS is committed to taking all necessary actions within its authority to safeguard U.S. national security. Consistent with law and practice, CFIUS does not publicly comment on transactions that it may or may not be reviewing.”