Japan’s Nippon Steel may need to revamp its growth strategy after US President Joe Biden blocked its $14.9 billion acquisition of US Steel, citing national security concerns. Despite the deal’s rejection, Nippon Steel’s share price could see a near-term bounce, analysts said.
Shares in Nippon Steel fell only 0.75% in the first trading session after the US president’s decision, which was well flagged, and were down 1% compared to the broader Tokyo market index. The deal had not been finalized, and Nippon Steel had not finalized a permanent financing plan, which had included raising equity as an option.
Analysts point out that the company’s earnings outlook remains unchanged, with significant growth expected in the next financial year starting in April. The removal of financing uncertainty related to the acquisition could support a near-term increase in the stock price.
However, concerns have been raised over the deal’s rejection’s impact on future US-Japan investment. Japan’s largest business lobby, Keidanren, said the decision was “extremely disappointing” and a cause for concern about the impact on future investment in the US and Japan-US economic relations.
The path forward for both companies is unclear, with options including suing the US government, another buyer potentially acquiring US Steel, or Republicans who favor the deal urging President-elect Donald Trump to find a way to approve it. However, lawyers and consultants suggest that a legal challenge would be tough. Nippon Steel President Tadashi Imai said that filing a lawsuit was one of the company’s important options, and that it would not take long to announce countermeasures against the US government’s decision.
