Nippon Steel’s (NPSCY) proposed $15 billion bid for U.S. Steel (X) has reached a critical juncture. According to Reuters, the Committee on Foreign Investment in the United States (CFIUS) has referred the deal to President Joe Biden for a final decision. The CFIUS reviewed foreign investments in the United States for potential national security risks and failed to reach a consensus on whether the merger would harm U.S. interests.
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With just 15 days to act, Biden can either block the proposed tie-up or allow it to proceed. If President Biden does not take any action within these 15 days, the merger would be unexpectedly approved. This controversial acquisition has faced opposition from both Biden and former President Donald Trump.
Nippon Steel Responds to the Presidential Review of the Deal
In response to the news of the deal being referred to Biden for a final decision, Nippon Steel commented, “We urge him (Biden) to reflect on the great lengths that we have gone to address any national security concerns that have been raised and the significant commitments we have made to grow U.S. Steel.”
Meanwhile, U.S. Steel echoed this sentiment, urging Biden to follow the law and approve the deal.
CFIUS Has Flagged Potential Risks regarding the Deal
The committee has flagged potential risks, including reduced domestic steel production and its implications for critical infrastructure projects, according to another Washington Post report, which first reported the deal’s referral to Biden. Nippon Steel countered these concerns, offering measures like appointing U.S. citizens to key leadership roles at U.S. Steel. However, the committee remained divided about whether these measures would be sufficient.
Despite these assurances, CFIUS raised unresolved risks in a detailed 29-page letter. Political factors further complicate the situation. Both Biden and Trump have publicly opposed the merger, likely swayed by its potential impact on union voters in Pennsylvania, where U.S. Steel is headquartered. Furthermore, the United Steelworkers Union has opposed the deal, adding pressure to block the deal.
If Biden opposes the transaction, Nippon Steel faces a $565 million breakup fee and has threatened legal action.
Is U.S. Steel a Good Stock to Buy?
Analysts remain bullish about X stock, with a Strong Buy consensus rating based on four Buys and one Hold. Over the past year, X has declined by more than 30%, and the average X price target of $44 implies an upside potential of 40.3% from current levels.
