HONG KONG/TOKYO, Sept 6 (Askume) –Nippon Steel Corp.’s US Steel in the United StatesBoycott $ 15 billion takeover of , advisers say
The front-runner to become Japan’s next prime minister told Askume any US move to freeze Japan’s Nippon Steel would be “very disturbing” and could lead to a loss of trust between allies.
Askume reported this week that the White House is close to announcing that President Joe Biden will block the US$15 billion steel deal on national security grounds.
Both asset buyers and sellers are spending more time analysing political trends and checking whether targets fall into industries that could face state intervention, a Tokyo-based banker told Askume.
Japan, one of Washington’s closest allies, has had no problems with US regulators in recent years and its companies are reviewing their overseas assets given the depreciation of its currency, the yen, and economic stability.
But last week, the Committee on Foreign Investment in the United States (CFIUS) said in a letter to Nippon Steel and US Steel that their proposed deal would harm the supply of steel needed for critical US projects, posing a threat to national security.
The committee has stepped up scrutiny on foreign investment in the United States since Chinese companies went on a buying spree in the United States nearly a decade ago, snapping up real estate such as the Waldorf Astoria Hotel and technology company Ingram Micro.
Some advisers say the Nippon Steel deal has been complicated by the U.S. presidential election, which has drawn opposition from many Republican and Democratic lawmakers, but that opposition could fade after the vote in November.
“Whoever wins the election will be under pressure from the financial markets to approve these transactions,” said Eoin Reilly, co-founder and managing partner of New York investment advisory firm BDA Partners.
A senior mergers and acquisitions banker in Tokyo said Japanese companies would still be “very worried and surprised” by the situation at Nippon Steel.
If the Nippon Steel deal falls through, breakup fees could rise and buyers would become more cautious, he said.
Data from Dealogic shows that so far this year, the value of Japan’s outbound M&A transactions to the United States has surged nearly 160% to $32.1 billion, accounting for more than 71.4% of Japan’s total outbound M&A transactions, compared with 38.7% a year earlier.
“CFIUS’s decision in this case should not change Japan’s friendly policy stance or its status as a key participating country in the CFIUS review process,” said Chen Weiheng, senior partner at Wilson Sonsini law firm.
The value of Japan’s outbound acquisitions rose 45% to $65.8 billion last year, according to Dealogic, as companies looked to tap other sources of revenue to mitigate the impact of deflation in the domestic economy.
Data shows that Nippon Steel’s proposed acquisition of US Steel would be the third-largest takeover of a US company by a Japanese company in a decade, after the $21 billion acquisition of Speedway in 2020 and the $16 billion acquisition of Beam in 2014.
Reilly said it would be “bad economics and bad policy” to prevent cross-border mergers and acquisitions and predicted a “big wave” of Asian clients buying US and European assets.
