U.S. Steel sues Biden and rival Cleveland-Cliffs over blocked merger
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Nippon Steel and U.S. Steel this morning sued the Biden administration for blocking their proposed tie-up, as expected.
Driving the news: They also filed a RICO complaint against rival Cleveland-Cliffs, the steelmaker's CEO, and the head of the United Steelworkers union. This was unexpected, and escalates the litigation from heated to nuclear.
The big picture: Nippon and U.S. Steel have no intention of letting their deal dream die without a giant fight.
Case No. 1: The first complaint alleges that CFIUS failed to conduct a good faith review of the proposed transaction, prioritizing politics over national security.
- The plaintiffs note how President Biden had signaled his opposition to the deal long before the CFIUS review process, a reversal of how the process is supposed to work. It claims that Biden and CFIUS "corrupted and compromised a critical mechanism for the protection of America's national security."
- They are asking a federal appeals court set aside Biden's order, and to order a new CFIUS review on an expedited basis. That presumably would kick the legal can to President-elect Trump, who also pledged to block the deal before any CFIUS review.
Case No. 2: The second suit accuses Cleveland-Cliffs and union leadership of conspiring to prevent Nippon from buying U.S. Steel, "as part of an illegal campaign to monopolize critical domestic steel markets."
- It's like a reverse antitrust argument, with the associated RICO argument tied to alleged promises from Cleveland-Cliffs that the union would get "valuable benefits" were it to oppose the deal.
- Those benefits aren't enumerated in the lawsuit, except to say that they were not part of the existing labor contract with Cleveland-Cliffs.
Zoom out: These cases are separate but related, with Nippon and U.S. Steel basically arguing that Biden's order is the ultimate result of pressure applied by Cleveland-Cliffs (both directly and via the union).
The bottom line: There was some talk last week that a Biden block could cause Cleveland-Cliffs and U.S. Steel to rekindle their prior merger talks, but right now that bridge seems to be in ashes.
