U.S. Steel shares plummet amid questions over the fate of its merger with Nippon Steel
U.S. Steel shares plunged on Wednesday as Wall Street questioned whether its $14.1 billion deal with Japan's Nippon Steel is at risk of derailing.
Shares of U.S. Steel plunged as much as 25% in afternoon trading and were briefly halted after the Washington Post reported President Joe Biden is preparing to formally block the proposed acquisition. As of 3:10 p.m., shares of U.S. Steel were down $6.50, or 18%, to $29.10.
The White House downplayed the Washington Post report, which cited three people familiar with the president's plans. In a statement, it cited a process by the Committee on Foreign Investments in the United States, or CFIUS, which is chaired by the Treasury secretary. CFIUS is reviewing the deal for potential national security concerns, and could advise against the merger. The Justice Department is also looking into possible antitrust issues.
"CFIUS hasn't transmitted a recommendation to the President, and that's the next step in this process," a White House official stated.
U.S. Steel, the country's third-biggest steel maker, is working to salvage its proposed takeover by Nippon Steel, opposed for months by Mr. Biden as well as more recently by both major candidates vying to replace him. The merger is also opposed by the United Steelworkers union, Pennsylvania Governor Josh Shapiro and both of the state's senators.
"The Japanese players appear not to be fully aware of the situation they got themselves in, buying a Pennsylvania steel company in the middle of a presidential election," Jonathan Grady, the founding principal of the consultancy firm Canary Group, told CBS MoneyWatch.
"It's a very complex, nuanced deal driven by politics — the financials almost don't matter at this point," said Grady, who has analyzed the deal for investors.
If the deal falls apart, U.S. Steel would have to close many of its blast furnace facilities, endangering thousands of jobs and making it more difficult to compete globally, the company warned Wednesday in a news release.
"We want elected leaders and other key decision makers to recognize the benefits of the deal as well as the unavoidable consequences if the deal fails," said David Burritt, president and CEO of Pittsburgh-based U.S. Steel.
The steelmaker also warned that the merger's failure would raise questions as to whether the company remains headquartered in Pittsburgh.
