Nippon Steel and U.S. Steel have filed a federal lawsuit in the United States challenging the Biden administration’s decision to block Nippon Steel’s proposed $15 billion acquisition of the Pittsburgh company. The president of the United Steelworkers union and a rival steelmaker joined forces to block the takeover, the companies said.

The lawsuit, filed on Monday, accuses U.S. President Joe Biden of undermining decisions by the Committee on Foreign Investment in the United States (CFIUS) to review foreign investments for national security risks and violating companies’ rights to a fair review.

In blocking the deal on Friday, Biden said U.S. companies that produce large amounts of steel needed to “continue to lead this fight on behalf of America’s national interests,” even though Japan, where the companies are based, is a powerful ally. This is the first time a U.S. president has blocked a merger between U.S. and Japanese companies.

In separate lawsuits filed with the U.S. Court of Appeals for the District of Columbia and the U.S. District Court for the Western District of Pennsylvania, the steelmakers claimed it was a political decision made by the Biden administration and had no sound legal basis.

“Nippon Steel and U.S. Steel have worked in good faith with all parties to highlight how the transaction will enhance, rather than threaten, U.S. national security,” the companies said in a prepared statement on Monday.

Nippon Steel has pledged to invest $2.7 billion in U.S. Steel’s aging blast furnace operations in Gary, Indiana, and Mon Valley, Pennsylvania, saying it is best positioned to help the U.S. compete in an industry dominated by China.

U.S. Steel has warned that if Nippon Steel runs out of cash, it will shift production from blast furnaces to cheaper, non-union electric arc furnaces and move its headquarters out of Pittsburgh.

In a separate lawsuit filed in the U.S. District Court for the Western District of Pennsylvania, the companies, in coordination with David McCall, president of the United Steelworkers (USW) union, allege that steelmaking rival Cleveland-Cliffs -Cliffs Inc) and its CEO, Lourenco Goncalves, “engaged in a coordinated series of anticompetitive and extortionate activities” to block the deal. McCall on Monday called the accusations baseless.

In 2023, Cleveland-Cliffs offered to acquire U.S. Steel for $7 billion before U.S. Steel accepted Japan Steel’s takeover offer. U.S. Steel rejected the offer and later accepted an all-cash offer from Nippon Steel, which has now been rejected.

politicized merger

The merger has become highly politicized ahead of the November U.S. presidential election, with both Democrat Joe Biden and Republican President-elect Donald Trump vowing to end it as they appeal to voters in the swing state of Pennsylvania, home to U.S. Steel’s headquarters. A merger case. USW President McCall opposed the partnership.

Both Trump and Biden claimed that even if the Japanese company offered to move its U.S. headquarters to Pittsburgh, home to the U.S. steelmaker, the company should remain U.S.-owned and pledged to abide by an agreement reached between U.S. Steel and U.S. Steel Corp. All agreements.

The companies allege that Biden sought to terminate the deal to “curry favor with Pennsylvania USW leadership in his bid for re-election.”

“CFIUS failed to conduct a good-faith, national security-focused regulatory review process as a result of President Biden’s improper influence to advance his political agenda,” the companies said in a statement announcing the lawsuit.

A White House spokesman said: “The National Security and Trade Experts Council determined that this acquisition poses risks to U.S. national security. President Biden will not hesitate to protect the country’s security, infrastructure and supply chain resiliency.”

The future of the lawsuit, which also targets Attorney General Merrick Garland and Treasury Secretary Janet Yellen, who oversees the Committee on Foreign Investment in the United States (CFIUS), is unclear. Experts say courts generally have great deference to CFIUS in defining national security.

The U.S. Justice Department declined to comment and the Treasury Department did not respond to a request for comment from Reuters.

“Why would they sell U.S. Steel now when tariffs will make it a more profitable and valuable company,” Trump asked in a post on his social media platform.

Trump promised to impose sweeping tariffs on imported products.

U.S. Steel was founded in 1901 by American giants such as Andrew Carnegie, JP Morgan and Charles Schwab, and emerged from the Great Depression and World War II with America’s industrial recovery is closely linked.

The company has been under pressure after several quarters of declining revenue and profits, making it an attractive takeover target for rivals looking to expand their U.S. market share.

“Manipulated” comments

Nippon Steel’s December 2023 acquisition of U.S. Steel faced resistance from the start.

The companies said Biden’s public opposition to the deal on March 14, before the CFIUS review began, prejudged the outcome and deprived the companies of due process guaranteed by the Constitution and CFIUS regulations.

A week later, McCaul endorsed Biden. Biden was later replaced by Vice President Kamala Harris, who also opposed the deal and was backed by the United Workers Union.

After review, CFIUS typically approves a deal or recommends that the president block it. In rare cases, when the agencies that make up CFIUS cannot agree, they can refer the matter to the president, as they did with the Nippon Steel deal on Dec. 23, setting the stage for Biden to block it foundation.

Until then, CFIUS staff had been prohibited from negotiating with the companies on proposed agreements to address the committee’s national security concerns, a clear departure from normal practice, the statement said.

“It is clear that the review process was manipulated so that its outcome would support President Biden’s predetermined decision,” the companies said. “This is not possible and is not the due process that CFIUS parties are entitled to employ.”