Nippon Steel said it planned to acquire U.S. Steel for $55 per share. This agreement has raised a fair share of hope and alarm from policymakers, advocates, and industry. The acquisition, which will transform U.S. Steel into a wholly owned subsidiary of Nippon Steel North America, comes with a unique stipulation: the U.S. government will hold a “golden share” in the transaction. This type of deal gives the federal government more leverage and authority. It gives them leverage to negotiate the board composition of the target company on the way in.
The purchase is required to preserve U.S. Steel’s business as a distinct and independent firm after the deal closes. Shareholder actions Nippon Steel intends to place members on the board with experience. Through its “golden share,” the U.S. government will expect to keep tight control and watchful eyes. This share provides the government the ability to control who sits on their board members. Secondly, it secures continued production at current rates post-acquisition.
Despite initial opposition from President Donald Trump, who ordered a review of the deal in April, he later praised it as a partnership aimed at addressing national security concerns. Trump’s turnabout seems to suggest that even he has figured out that it’s a tricky proposition to allow foreign ownership of essential infrastructure.
“It’s a national security agreement that will be signed with the U.S. government.” – Sen. Dave McCormick
The U.S. government recently decided to bestow upon itself a golden share. This action seeks to lower the risks associated with foreign ownership of U.S. steelmaking capacity. In exchange, the federal government would have certain contractual rights to veto specified corporate actions. Primarily, these actions will be deemed detrimental to the national interest.
U.S. Trade Representative Jamieson Greer underscored the importance of maintaining control over critical sectors, stating, “The underlying principle is that the United States should have control over key critical sectors, whether it’s basic manufacturing or high tech.”
Obviously, not everybody is so sure that this acquisition will be good for American workers. United Steelworkers (USW) President David McCall expressed deep concern over Nippon Steel’s track record with the trade laws. He stressed how this recent track record hurts American jobs. He stated, “Our concern remains that Nippon, a foreign corporation with a long and proven track record of violating our trade laws, will further erode domestic steelmaking capacity and jeopardize thousands of good, union jobs.”
Senator Dave McCormick, who supported the deal, hailed it as a win-win for both parties. He underscored that despite having seats on the board, Nippon Steel will not be running U.S. Steel’s operations.
“Nippon Steel is going to have some involvement, but no control of the company.” – White House Trade Advisor Peter Navarro
The move is emblematic of larger trends toward industry consolidation across the globe and poses broader questions about foreign investment in America’s critical infrastructure sectors. Content as the deal moves forward, both parties will have to contend with regulatory scrutiny and a growing public sentiment against foreign ownership.