By Alexandra Alper and Aatreyee Dasgupta
WASHINGTON (Reuters) – U.S. President Joe Biden illegally blocked Nippon Steel’s $14.9 billion bid for US Steel through a bogus national security review, the companies alleged in a lawsuit they said was filed on Monday.
The companies want the U.S. Court of Appeals for the District of Columbia to overturn Biden’s decision to thwart the deal so they can secure another chance for approval through a new national security review free of political influence.
The lawsuit alleges that Biden undermined the ruling of the Committee on Foreign Investment in the United States, which reviews foreign investments for national security risks, and violated companies’ right to a fair review.
The merger had become highly politicized before the November US presidential election, with both Democrat Biden and Republican President-elect Donald Trump vowing to undo it as they courted voters in the swing state of Pennsylvania, where US Steel is based. United Steelworkers union president David McCall opposed the union.
Both Trump and Biden said the company should remain U.S.-owned even after the Japanese company offered to move its U.S. headquarters to Pittsburgh, where the U.S. steelmaker is based, and vowed to honor all existing agreements between U.S. Steel and the USW. .
Biden attempted to overturn the deal to “curry favor with USW leaders in Pennsylvania in his bid for re-election,” the companies allege.
“As a result of President Biden’s undue influence to advance his political agenda, the Committee on Foreign Investment in the United States failed to conduct a good faith regulatory review process focused on national security,” the companies said in a statement. release.
A White House spokesperson defended the review, adding: “President Biden will never hesitate to protect the security of this nation, its infrastructure, and the resilience of its supply chains.”
The lawsuit echoes claims the companies made in a December 17 letter to CFIUS seen by Reuters.
“We cannot back down after being treated unreasonably. We will fight back thoroughly,” Nippon Steel Vice President Takahiro Mori said Monday.
Mori said the CFIUS review process lacked integrity as the Japanese company did not receive written comments on the proposed national security agreement, Nikkei said.
The prospects for the lawsuit, which also names US Attorney General Merrick Garland and Treasury Secretary Janet Yellen, are unclear. Yellen oversees CFIUS. Experts say courts generally give great deference to CFIUS in defining national security.
The Justice Department declined to comment and the Treasury Department did not respond to a request for comment.
Trump, in a post on his social media platform, said: “Why would they want to sell US Steel now when tariffs will make it a much more profitable and valuable company?”
CLIFFS AND USW ALSO ATTENTION
The companies also filed a second lawsuit against rival bidder Cleveland-Cliffs (NYSE:), its CEO Lourenco Goncalves and USW’s McCall “for their illegal and coordinated actions” aimed at preventing the deal.
They argue that Cliffs, Goncalves and McCall colluded in an “illegal campaign” to allow Cliffs to “monopolize domestic steel markets” by thwarting any further attempts to purchase US Steel.
Goncalves participated in at least nine calls assuring investors that Biden would ruin the Nippon Steel merger, according to last month’s letter to CFIUS, Reuters reported on Sunday.
Goncalves said in a statement Monday that “Nippon Steel and US Steel continue to play the blame game in a desperate attempt to distract from their own failures. Today’s lawsuits against the US government, the USW and “Cleveland-Cliffs represent a blatant effort to scapegoat others for US Steel and Nippon Steel’s self-inflicted disaster.”
McCall said the USW “will vigorously defend itself against these baseless allegations.”
Last week, Biden blocked the proposed purchase on national security grounds, dealing a potentially fatal blow to the controversial plan after a year of review.
US Steel, founded in 1901 by some of America’s greatest tycoons, including Andrew Carnegie, JP Morgan and Carlos Schwab (NYSE:), was intertwined with the industrial recovery after the Great Depression and World War II.
US Steel shares rose 5.2% on Monday afternoon. The company has been under pressure after several quarters of declining revenue and profits, making it an attractive acquisition target for rivals seeking to expand their share of the US market.
‘MANIPULATED’ REVIEW PROCESS
Nippon Steel’s December 2023 bid for US Steel faced hurdles from the start.
Biden came out against the deal on March 14, even before the CFIUS review began, prejudging the outcome and depriving companies of due process guaranteed by both the Constitution and CFIUS regulations, the companies said.
McCall endorsed Biden a week later. Biden was later replaced on the 2024 Democratic presidential ticket by Vice President Kamala Harris, who also opposed the deal and was endorsed by the USW.
After a review, CFIUS typically approves a deal or recommends the president block it. In rare cases, when the agencies that make up CFIUS cannot agree, they can refer the matter to the president, as they did with the Nippon Steel deal on December 23, setting the stage for Biden’s blocking measure.
Before that, CFIUS staff were prohibited from negotiating with the companies on a settlement proposal to address the committee’s national security concerns, the US Steel and Nippon Steel statement alleges, a marked departure from normal practice.
“It is clear that the review process was being manipulated so that its outcome supported President Biden’s predetermined decision,” the companies said. “This cannot be, and is not, the due process to which the parties are entitled before the CFIUS,” they added.
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