By The US government is reportedly considering blocking Japan’s Nippon Steel Corp (TYO: 5401) from acquiring United States Steel Corporation (NYSE: X) for $14.1 billion, citing national security concerns.
However, no clear public evidence supports this claim, according to Matthew Slaughter, Dean of Dartmouth’s Tuck School of Business.
Speaking on CNBC’s Squawk Box, Slaughter attributed the potential move to block Nippon Steel’s takeover to “domestic political considerations.”
Following the news, US Steel shares rose by 3%.
Nippon-US Steel deal seems headed for a collapse
US Steel has stated it will explore all legal avenues to complete its pending deal with Nippon Steel.
However, the transaction faces significant opposition from US politicians, including presidential candidate Kamala Harris, leaving the deal’s chances slim, Slaughter noted.
Slaughter disagrees with the opposition, citing foreign investment’s historical contribution to America’s economic growth, job creation, and innovation.
According to him, international investments like Nippon’s acquisition typically strengthen the US economy.
Japan’s largest steelmaker has already made concessions to address national security concerns, such as agreeing that the majority of US Steel’s board and core management will be US citizens.
Why does Slaughter favor Nippon buying US Steel?
Slaughter supports Nippon’s bid to acquire US Steel, arguing that foreign companies bring valuable technology, managerial expertise, and capital, ultimately benefiting American workers.
He cited data showing that in 2021, U.S. affiliates of foreign multinationals employed 7.9 million Americans, contributed to 14% of private sector R&D, 17% of capital investments, and more than 24% of total US exports.
These companies also paid their workers about 22% more than the average U.S. private sector wage.
Nippon Steel plans to invest $1.7 billion in U.S. Steel plants, which the Pittsburgh-based company has warned may otherwise face closure. Slaughter emphasized,
We’ve lost the story of what it means for the United States to be leading in the global economy. We’ve had that story for a lot of decades and international trade investment and immigration were central to that.
Analysts still bullish on US Steel
Despite losing over 35% of its stock value in 2024, Wall Street maintains an “overweight” rating on US Steel, with a consensus price target of $42—indicating a potential 40% upside.
Although U.S. Steel recently posted disappointing second-quarter results—reporting a 56% year-over-year drop in net earnings to 84 cents per share and an 18% decline in revenue to $4.12 billion—the company still outperformed analyst expectations, which forecasted earnings of 72 cents per share on revenue of $4.01 billion.
This may explain why analysts remain optimistic about US Steel’s future.
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