(Bloomberg) -- Nippon Steel Corp. and United States Steel Corp. jointly filed a pair of lawsuits in a last-ditch effort to preserve their planned merger, which was blocked last week by President Joe Biden.
The companies said Monday in a joint statement that they had filed a petition with the federal appeals court in Washington, arguing that the Committee on Foreign Investment in the United States failed to consider the deal on national security grounds and that Biden’s order to block it was made for “purely political reasons.”
They also filed a lawsuit in federal court in Pittsburgh against rival US steelmaker Cleveland-Cliffs Inc. and Chief Executive Officer Lourenco Goncalves, as well as United Steelworkers President David McCall, alleging coordinated anticompetitive and racketeering activities designed to allow only Cliffs to acquire US Steel.
The statement came barely 72 hours after Biden blocked the deal, in a move that was widely anticipated by the market. Executives at US Steel and Nippon Steel had refrained from publicly questioning the pending Cfius process, letting it play out in hopes that the panel would unanimously agree the deal didn’t pose a national security risk. With Biden’s formal decision in hand, the companies have started a new chapter of the yearlong saga — litigation.
Trump Weighs In
“Both Nippon Steel and US Steel have engaged in good faith with all parties to underscore how the transaction will enhance, not threaten, United States national security,” the companies said in their statement. “Today’s legal actions demonstrate Nippon Steel’s and US Steel’s continued commitment to completing the transaction” for the benefit of all stakeholders.
The challenges also come as President-elect Donald Trump, who opposes the deal, prepares to take office on Jan. 20. On Monday morning Trump weighed in on the transaction for the first time since Biden blocked it.
“Why would they want to sell US Steel now when tariffs will make it a much more profitable and valuable company?” he said on his social media platform, Truth Social, referring to the broad range of tariffs he has promised. “Wouldn’t it be nice to have US Steel, once the greatest company in the world, lead the charge toward greatness again?”
US Steel shares were up 4.5% to $31.85 at 1:26 p.m. in New York. Shares of Nippon Steel dropped overnight, falling 0.8% in Tokyo.
Uphill Battle
The White House said national security was paramount.
“A committee of national security and trade experts determined this acquisition would create risk for American national security,” White House spokeswoman Robyn Patterson said. “President Biden will never hesitate to protect the security of this nation, its infrastructure and the resilience of its supply chains.”
Cliffs’ Goncalves said in a statement that the legal challenges by the two companies were “a desperate attempt to distract from their own failures,” that their lawsuit has no merit and that “we are well prepared to litigate and look forward to exposing the facts in court.”
The United Steelworkers’ McCall said “we are reviewing the complaint and will vigorously defend against these baseless allegations.”
The prospects for rescuing the deal may be limited. US law gives the president the power to kill any merger deemed a threat to national security, a reason Biden cited in his announcement. And the explicit authority the law confers on the president makes it unlikely to be an attractive case for the Supreme Court, should the companies eventually appeal there.
Legal Strategy
The filings give a clear view of how Nippon Steel and US Steel had planned to approach the legal process if Biden ultimately killed the deal. They are asking the US Court of Appeals for the District of Columbia Circuit to set aside what they call the “unlawful” Cfius review and Biden’s accompanying order to block the deal, and to order the panel to conduct a new review, according to their statement. The petition itself isn’t yet available on the public docket.
In the Pittsburgh lawsuit, the companies claim that Cliffs, Goncalves and McCall engaged in a racketeering enterprise by publicly broadcasting false statements about the deal and privately executing a “misinformation campaign” to drive US Steel toward Cliffs and ensure “no other bidder is permitted to complete a transaction.”
They list what they call violations by Biden and Cfius, including that the first time the panel identified any national security concerns was on a Saturday afternoon of Labor Day weekend. They say in their statement that the panel sent a 17-page letter “riddled with inaccuracies” and gave the companies only one business day to respond. They claim Cfius staff were told not to offer counterproposals or to engage in any discussions about the draft national security agreements the companies submitted in the fall.
And they say Biden blocked the deal to gain political favor with union steelworkers in Pennsylvania in his re-election bid.
‘Improper Exploitation’
“Nippon Steel and US Steel are disappointed to see such a clear and improper exploitation of the country’s national security apparatus in an effort to help win an election and repay political favors,” they said in the statement.
The lawsuit against Cliffs, meanwhile, claims United States Trade Representative Katherine Tai, a voting member of Cfius, got a private tour and “fireside chat” with CEO Goncalves and United Steelworkers leadership at a Cliffs facility. The suit says Cliffs and Goncalves “improperly bought the loyalty of McCall and the USW’s leadership” and that Cliffs has “improperly bought the loyalty of McCall and the USW’s leadership” and that Cliffs has “repeatedly trafficked in xenophobic tropes as part of its unlawful campaign against the merger.”
The Pittsburgh case is United States Steel Corp. v. Cleveland-Cliffs Inc., 25-cv-00015, US District Court, Western District of Pennsylvania.
--With assistance from Josh Wingrove and David Voreacos.
