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In a notable turn of events, shares of U.S. Steel (NYSE: X) saw a decline of about 6% during Tuesday's premarket trading session. The dip comes in the wake of Vice President Kamala Harris's public disapproval of the proposed acquisition of the American steel manufacturer by Nippon Steel. This corporate takeover, initially announced last December, has faced increased scrutiny, with Harris adding her voice to a growing chorus of critics.
During a recent visit to Pittsburgh alongside President Biden, Harris praised the administration's efforts to support union workers and their families. At a union hall campaign rally, she firmly stated that U.S. Steel should remain American-owned, reflecting sentiments previously expressed by President Biden. Back in March, Biden hinted at his concerns regarding Nippon Steel’s ambitious $14.1 billion bid, though he refrained from explicitly stating he would intervene to block the deal. Not surprisingly, former President Donald Trump has also vowed to halt the acquisition if he regains office—a promise that resonates with a faction of the electorate.
This sentiment of protectionism is echoed by several lawmakers, including Republican vice presidential candidate Sen. JD Vance, who have openly criticized the acquisition. Harris emphasized the historical significance of U.S. Steel, saying it is crucial for America to sustain strong domestic steel companies. Her assertion underscores a broader campaign strategy focused on American industrial pride and union support.
The United Steelworkers union has consistently voiced its objections to Nippon Steel's takeover, arguing that the Japanese conglomerate has not provided adequate guarantees regarding the continued operation of unionized mills or adherence to existing contracts. Despite this, Nippon Steel claims it will honor the union contract, valid until 2026, and has assured that there will be no layoffs during this period. Notably, they have pledged significant investments in U.S. Steel's aging facilities located in Gary, Indiana, and around Pittsburgh, nearly doubling their investment commitments to $2.7 billion last week. This move aims to alleviate fears among workers and local officials about possible closures.
However, U.S. Steel's management has admitted that competing with Nippon Steel’s financial offers is a daunting task. The company has already faced workforce reductions in recent years due to plant closures, which has strained its relationship with union representatives. Despite these challenges, U.S. Steel is moving ahead with its agreement with Nippon Steel; shareholders have approved the enticing cash offer of $55 per share.
While U.S. Steel has been considering various bids for months, it ultimately rejected a competing proposal from Cleveland-Cliffs, which had garnered support from the steelworkers' union. Meanwhile, the proposed acquisition is currently under antitrust review by the Justice Department and is also being scrutinized by the Committee on Foreign Investment in the U.S. This committee holds significant authority, including the ability to recommend that the president block the transaction if they deem national security at risk.
