Karishma Vanjani and Al Root

United States Steel and Japan's Nippon Steel filed joint lawsuits Monday in an attempt to keep their merger, valued at more than $14 billion, alive.

It's a long shot, but the move sent U.S. Steel shares higher on Monday.

The lawsuits challenge one of the final significant acts of President Joe Biden's tenure, calling his decision to block the buyout of the American steel maker by Nippon Steel an "unlawful political influence."

The two companies also filed a separate suit against another American steel company, Cleveland-Cliffs, and its CEO Lourenco Goncalves, as well as David McCall, president of the United Steelworkers union, "for their illegal and coordinated actions aimed at preventing the transaction."

Cleveland-Cliffs and the United Steelworkers didn't immediately respond to a request for comment.

Nippon, the fourth-largest steelmaker in the world, bid to buy U.S. Steel, which ranks in the mid-20s, in December 2023. The deal immediately faced political pushback, and Biden blocked the deal on Friday, citing national security concerns and the need to keep steelmaking operations domestic.

Biden's decision came after a panel called the Committee on Foreign Investment in the United States was unable to reach a consensus on whether the deal posed national security risks. The two companies are asking the committee to conduct a fresh review.

Both President-elect Donald Trump and Biden have emphasized the importance of U.S. manufacturing, courting steel workers, and calling for tariffs on steel coming from China during their election campaigns. In a recent post on Truth Social, Trump said he would block the deal too; he has called it "psychologically" difficult for the industry in the past.

Most of the pushback from politicians stems from a preference for U.S. Steel to be U.S.-owned and for the U.S. to make its own steel. The mills, of course, don't go anywhere and they would be mostly operated and run by Americans. What's more, Nippon has offered the government concessions about employment while committing billions to improve U.S. Steel's operations in this country.

Nippon, and Japan, don't have a large presence in the American steel market. Japanese steel represents less than 5% of total demand in a typical year, according to U.S. government data.

"To our understanding, Biden's decision is final, and any legal challenge by Nippon Steel or U.S. Steel would be an uphill battle," wrote BNP Paribas Exane analyst Tristan Gresser in a Monday report.

He sees some opportunity in the recent volatility, though.

"U.S. Steel shares are seemingly finding support around $30, similar to last September," he added. "We have long argued that a conservative sum-of-the-parts analysis would easily put [a] fair value around $40."

Gresser has a positive view of the stock and a $37 price target.

Biden's decision to block a deal with a company in Japan, an allied country, and Trump's willingness to do the same, have raised questions about the sweeping powers that presidents hold in the name of national security. National security was the basis for Trump's tariffs in his first administration, and that justification is only likely to become more common when he returns to power on Jan. 20, Barron's Matt Peterson wrote recently.

U.S. Steel stock was up 4.7% in midday trading at $31.91 while the S&P 500 and Dow Jones Industrial Average were up 1.3% and 0.8%, respectively.

Cleveland-Cliffs shares were up 7.9% at $10.24. It put U.S. Steel in play when it bid $35 a share in cash and stock in August 2023.

"Its 67-year-old CEO has said he is still interested in acquiring US Steel, but his stock traded below $9 [recently] and that hadn't happened in four years," wrote Gordon Haskett analyst Don Bilson in a recent report. "Our point is Cliffs has its own demons to deal with in 2025."

The demons and the American political landscape might leave U.S. Steel on its own.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

January 06, 2025 12:30 ET (17:30 GMT)

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