U.S. Government Golden Share Veto Power in the $14.9 Billion Nippon Steel-U.S. Steel Acquisition

The $14.9 billion acquisition of U.S. Steel by Japan’s Nippon Steel closed on the morning of Wednesday, June 18, 2025, when U.S. Steel’s shares were delisted from the NYSE. This deal marks one of the larger acquisitions in U.S. industrial history, at the intersection of steel tariffs, foreign investment and the future of American manufacturing. Interestingly, at the instigation of the Trump administration, a non-economic golden share – a mechanism that grants a veto over critical corporate decisions – was issued to the U.S. government to allow it to maintain oversight of key decisions.

The Acquisition of U.S. Steel by Nippon Steel

Nippon Steel acquired U.S. Steel in an all-cash deal valued at $55 per share, a significant premium over U.S. Steel’s market price at the time of the announcement in late 2023. U.S. Steel is now a wholly owned subsidiary of Nippon Steel, with strategic control transferred to the Japanese parent company. However, due to U.S. Steel’s critical role in U.S. military supply chains, the Trump administration secured a golden share as a safeguard.

Understanding the Golden Share

A golden share empowers its holder – typically a government – to veto significant corporate decisions despite limited ownership. In the U.S. Steel acquisition, the U.S. government’s non-economic golden share ensures veto power over certain major decisions, such as relocating the company outside the United States, moving its Pittsburgh headquarters or changing the company’s name. During the regulatory review, safeguards were implemented to ensure that most of U.S. Steel’s board members and its CEO will continue to be U.S. citizens and that the company remains incorporated in the U.S. These measures reflect political efforts to maintain oversight of a firm deemed vital to American manufacturing, national defense and infrastructure.

Nippon Steel’s Strategic Goals

Nippon Steel, the world’s fourth-largest steel producer, had pursued U.S. Steel since December 2023 to bolster its global capacity and ultimately to assist in responding to the 50% steel tariffs imposed by the U.S. The acquisition boosts Nippon Steel’s production to 86 million tons, approaching its 100-million-ton target. The company plans to invest heavily in U.S. Steel, including $1 billion for a greenfield project and $11 billion by 2028, enhancing operational capabilities. Had security approvals not been obtained, Nippon Steel could have faced a $565 million breakup fee.

Steel Tariffs and Economic Nationalism

The acquisition has raised concerns about the long-term effectiveness of steel tariffs, which were initially introduced to protect domestic producers such as U.S. Steel. Critics have argued that foreign ownership may undermine these protections, potentially weakening national security and economic independence. This sentiment has resonated in steel-reliant states like Ohio and Pennsylvania, where labor unions and policymakers are outspoken opponents of foreign control of critical industries. The U.S. government’s golden shares are a partial response to these concerns.

U.S.-Japan Relations and Global Implications

Despite Japan’s status as a trusted U.S. ally, the U.S. Steel/Nippon Steel deal underwent rigorous scrutiny by the Committee on Foreign Investment in the United States (CFIUS) to assess its implications for national defense and industrial capacity. Nippon Steel’s stock has responded positively to the merger’s scale, but the outcome may set a precedent for future foreign takeovers of U.S. industrial firms, influencing U.S.-Japan and other bilateral economic relations.

Impacts on the Steel Market

The merger has positioned the combined entity to expand its capabilities, innovate and access global markets. Nippon Steel has committed to growing U.S. Steel’s domestic operations while maintaining the Pittsburgh headquarters. However, consolidation may reduce competition, increase pressure on smaller U.S. producers and influence global steel pricing, increasing concerns and criticism among industry stakeholders.

Labor and Legislative Concerns

The United Steelworkers (USW) union has voiced concerns about the future of job security, pensions and labor relations under foreign ownership. Despite Nippon Steel’s assurances to honor existing agreements, skepticism persists. Congressional leaders from both parties are debating responses, ranging from increased oversight to potential restrictions on similar future acquisitions.

Conclusion

The Nippon Steel-U.S. Steel acquisition stands as a bellweather business transaction, intertwining economic nationalism, steel tariffs and the future of U.S. manufacturing. Its legacy will likely shape how the U.S. balances globalization with domestic control over strategic industries, influencing policy and industry dynamics for years to come.

About DelMorgan & Co.

DelMorgan & Co. is a leading global investment bank headquartered in Santa Monica, in the greater Los Angeles area of Southern California. With over $300 billion of successful transactions in over 80 countries, DelMorgan‘s Investment Banking professionals have worked on some of the most challenging, most rewarding and highest profile transactions in the U.S. and around the globe.