On Friday, President Joe Biden formally blocked the $14.9 billion takeover of U.S. Steel (X) by Japan’s Nippon Steel (NPSCY), fulfilling his promise to keep the American industrial giant under domestic ownership. This decision comes after a Washington Post report earlier today that Biden was likely to block the deal. Shares of U.S. Steel declined in pre-market trading following the decision.
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The Committee on Foreign Investment in the United States (CFIUS) had previously referred the decision to approve or block the deal to Biden.
Why Did Biden Block the Deal?
Biden stated that Nippon Steel’s proposed $14.9 billion acquisition of U.S. Steel would place one of the nation’s largest steel producers under foreign control, posing a risk to vital supply chains in the U.S. Furthermore, Biden commented, “Today’s action reflects my unflinching commitment to utilize all authorities available to me as President to defend U.S. national security, including by ensuring that American companies continue to play a central role in sectors critical to our national security.”
This decision highlights a growing bipartisan shift toward protectionism in the United States, driven by escalating geopolitical tensions.
Both Trump and Biden Opposed U.S. Steel Takeover
Both Biden and Trump had publicly opposed the merger, likely swayed by its potential impact on union voters in Pennsylvania, where U.S. Steel is headquartered. Additionally, the United Steelworkers Union had opposed the deal, increasing pressure to block it.
Biden’s rejection of the deal has left Nippon Steel facing significant financial and legal consequences, including a $565 million breakup fee. The Japanese company has already hinted at potential legal action if the deal is blocked.
Is X Stock a Buy or Sell?
Overall, Wall Street has a Strong Buy consensus rating on U.S. Steel stock based on four Buys versus one Hold recommendation. The average X price target of $44 implies about 35% upside potential from current levels. Shares of US Steel have declined by more than 30% over the past year.
