United States Steel (NYSE:X) stock plunged on Wednesday on reports that President Joe Biden plans to voice concerns over Japan-based Nippon Steel’s (OTCMKTS:NPSCY) proposed purchase of the steelmaker. Indeed, X stock closed in the red by almost 13% today, one of its largest single-day losses in years.
It appears that the Biden Administration is attempting to appease the American steel union as it pursues better agreement terms from Nippon. Nippon has proposed to purchase U.S. Steel for $55 per share.
Biden is expected to soon release a statement outlining the full scope of his scrutiny over the pending buyout, according to Financial Times anonymous sources.
This isn’t the first instance of Biden urging caution over the deal, given United Steel Workers’ history in Pennsylvania, an important swing state. Indeed, the administration has repeatedly voiced disagreements with the potential takeover in recent months. In December, White House National Economic Adviser Lael Brainard stated that Biden believes the deal merits “serious scrutiny.”
That said, the administration hasn’t quite gone so far as to attempt to cancel the deal. Even now, insiders suspect Biden won’t outright oppose Nippon’s bid.
On the other hand, former President Donald Trump has pledged to block the bid, as part of his current campaign promises.
X Stock Sinks as Nippon Deal Undergoes Review
Currently, Nippon’s proposed purchase of U.S. Steel is set for review by the Committee on Foreign Investment in the United States (CFIUS). It’s unclear exactly what the regulatory procedure entails.
The matter remains highly sensitive, given Japan’s status as one of the country’s closest allies. According to one anonymous source, it’s “embarrassing” for the administration to “send a signal of distrust regarding Japanese ownership of US companies,” they said. “The president knows all this, but sadly it looks like election year politics will win out.”
Some believe the inherently political affair may weigh on CFIUS’s evaluation.
“While [CFIUS] is ordinarily immune to political pressure this case involves an iconic asset with unique capabilities coupled with an administration who has made protecting manufacturing and middle-class jobs the foundation of its foreign policy,” said Ivan Schlager, a notable CFIUS lawyer.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
