Why Nippon Steel’s $15 Billion Takeover of U.S. Steel Is in Peril

When U.S. Steel put itself up for sale in 2023, executives at Nippon Steel in Tokyo saw an opportunity: Buying the American steel maker could help it offset anemic demand in its home country and strengthen its hand in a global business dominated by China.

On Dec. 18, the companies announced that Nippon Steel had agreed to acquire U.S. Steel for $14.9 billion, a 40 percent premium to U.S. Steel’s share price at the time. Analysts praised Nippon Steel as a potential savior of U.S. Steel, a onetime backbone of the American economy that had fallen behind rivals.

But almost immediately, the merger incited a backlash in the United States that has prevented it from being completed.

U.S. politicians from both parties have condemned the prospect that a storied 123-year-old American industrial company would be acquired by a foreign corporation. The timing was also particularly bad for Nippon Steel: The United Steelworkers union, the group that most forcefully opposed the deal, is based in Pennsylvania, a state that could determine the winner of the presidential election in November.

Much of the furor surrounding the deal can be traced back to Nippon Steel’s decision not to consult union leaders while it negotiated with U.S. Steel, according to interviews with some of the key players, including two U.S. and Japanese officials who informally advised Nippon Steel. Both spoke on the condition of anonymity because they were not authorized to speak publicly.

Nippon Steel also initially underestimated the challenges that United Steelworkers opposition would pose to closing the deal, especially in an election year, the two officials said.