Nippon Steel shares down after US government blocks U.S. Steel purchase

TOKYO (Reuters) - Shares in Nippon Steel fell more than 1% on Monday after U.S. President Joe Biden blocked its proposed $14.9 billion acquisition of U.S. Steel, dampening growth prospects for Japan's largest steelmaker.

Biden cited national security concerns, in a potentially fatal blow to the deal after a year-long review.

Nippon Steel's share price decline was limited given Biden's opposition had been well-flagged and U.S. Steel shares had been trading far below the offer price as a result.

Nippon Steel shares were down 1% at 3,151 yen in early Monday trade, compared with a 0.3% fall in broader Topix index. They closed at 3,182 yen on Dec. 30, the final trading day of 2024 on the Tokyo Stock Exchange, which was closed for the remainder of last week for the New Year holiday.

The proposed deal has not yet been terminated by the companies even after Biden blocked the purchase.

In a joint statement, Nippon Steel and U.S. Steel called Biden's decision "unlawful" and said they were left with no choice but to take all appropriate action to protect their legal rights.

Nippon Steel will owe U.S. Steel a $565 million break fee if it is not completed and the Japanese steelmaker will require a major rethink of its overseas-focused growth strategy.

With U.S. Steel, Nippon Steel aimed to raise its global steel production capacity to 85 million metric tons per year from 65 million tons now, nearing its long-term goal of lifting production capacity to 100 million tons.

Nippon Steel may file a lawsuit against the U.S. government challenging the procedures behind the decision, Japan's Nikkei business daily reported on Saturday.

Nippon Steel President Tadashi Imai said filing a lawsuit against the U.S. government is one of the "important options", Nippon Television reported on Monday.

Imai told reporters that the U.S. government's reviewing process and the decisions over its acquisition proposal did not seem properly handled, adding Nippon Steel is "entitled to a proper review," according to the report.

Imai said that it would not take long for the company to announce countermeasures to the U.S. government's decision, the report said.

A Nippon Steel spokesperson confirmed it plans to hold a press conference to discuss the U.S. government's decision, though no date has been set. Kyodo news agency reported the press conference will be held on Tuesday.

(Reporting by Mariko Katsumura, Noriyuki Hirata, Yuka Obayashi; Editing by Jamie Freed)