Shares of U.S. Steel (NYSE:X) plunged 9.82% in overnight trading on Robinhood on Friday, following a modest 1.38% gain during the last after-hours session.
What Happened: This decline comes as President Joe Biden is poised to block the proposed acquisition by Nippon Steel (OTC:NPSCY), potentially as soon as Friday, Reuters reported, citing a source familiar with the matter.
Despite Biden’s previous opposition to foreign ownership of the American steel giant, the decision remains pending.
In a strategic move to gain approval, Nippon Steel has proposed granting the U.S. government direct veto power over any changes in production at U.S. Steel’s facilities. The Japanese company has also committed to maintaining production levels at its mills in six states for a decade, contingent on approval from the Committee on Foreign Investment in the United States (CFIUS).
The deal has received backing from key CFIUS members, including the Justice, Treasury, and State Departments. However, U.S. Trade Representative Katherine Tai has raised concerns about labor issues. CBS News reports that U.S. Steel may pursue legal action if President Biden blocks the acquisition, potentially targeting both the administration and competitor Cleveland-Cliffs Inc.
The White House has yet to respond to Benzinga’s queries.
Why It Matters: The proposed acquisition by Nippon Steel has stirred significant debate within the U.S. government. CFIUS had previously warned that a takeover by the Japan-based company could lead to reduced domestic steel output, posing risks to national security.
President Biden’s decision is complicated by opposition from United Steelworkers Union President David McCall, who criticized the bid as detrimental to workers and questioned Nippon Steel’s commitment to unionized operations. Despite internal debates within the White House, Biden’s stance diverges from that of some advisers who support the acquisition.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
Photo by Dennis Diatel on Shutterstock
