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Nippon Steel agreed to pay a $7bn premium to acquire US Steel way back in December 2023. It turned out that wasn’t enough to get control. In the end, Nippon has had to pay twice, in effect — first to US Steel shareholders, and then to President Donald Trump.
Trump has withdrawn his opposition to the tie-up, in return for various conditions. Over and above the $14.9bn purchase price, Nippon will invest an additional $11bn in the company over the next three years, more than quintuple US Steel’s average annual capital expenditure. The US government will get a so-called “golden share”, giving it power over operational and governance matters.
This last part is highly unusual. After all, one reason a bidder generally pays a premium in an acquisition is to secure full dominion over the company. In this case, Trump’s and future administrations might have power to select some board members, veto others, and make employment and investment decisions, the New York Times has reported, concessions almost unprecedented for a private company.
The Trump White House has not been shy about inserting itself into private enterprise and picking winners and losers. That can result in odd combinations of carrot and stick. In early June, the White House said it would double the tariff on foreign steel to 50 per cent, which could put US Steel’s finances on a firmer footing, and give Nippon comfort as it prepares to invest heavily, including potentially a new US steel mill.
Among the biggest winners this time are US Steel shareholders. The company’s stock has mostly traded far below the $55-a-share offer price since December 2023. Blocking the deal seemed for a while one of the few topics on which Trump and then-President Joe Biden agreed. While Japan is a US ally, the United Steelworkers union had strongly opposed the deal. Shareholders will now get a slug of cash that’s double where the shares had been trading before a bid battle broke out.
Could this deal set a precedent? Golden shares are not the norm in corporate America, though they are permitted under the laws of Delaware, where most big companies are incorporated. Last year, for example, a court challenged some special governance rights given to Ken Moelis, founder of investment banking boutique Moelis & Co, saying a golden share would have been a better way to achieve a similar goal.
In an environment where horse-trading abounds, anything is possible. For would-be dealmakers, having more than a pound of flesh means having currency to deal with the Trump administration. Over time, winning US Steel might prove expensive for Nippon Steel in light of its various concessions and promises. By further blurring the faint line between business and politics, the deal could prove expensive for everyone else too.
sujeet.indap@ft.com
