“Trump’s ‘Golden Share’ in U.S. Steel Raises Nationalization Fears, Complicates Nippon Steel Deal and Foreign Investment Outlook”

Key Points

• Research suggests dealmakers are concerned Trump’s golden share in US Steel could set a precedent for government control in future deals.

• It seems likely that foreign investors may hesitate, fearing similar veto powers in cross-border mergers.

• The evidence leans toward this move introducing uncertainty, potentially deterring investment in US companies.

Background

The Trump administration recently approved the merger between US Steel and Nippon Steel, but with a condition: the US government gets a 'golden share,' giving it veto power over key decisions like investments and job transfers.

Dealmakers’ Concerns

Dealmakers fear this could become a model for other deals, especially in strategic sectors, making foreign investors wary. Legal experts note it could complicate future cross-border mergers and acquisitions, as investors might question their control over assets.

Impact on Investment

This precedent might reduce the attractiveness of US companies for foreign investment, with some experts suggesting it could increase financing costs and limit shareholder control, affecting company value.

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Comprehensive Analysis of Dealmakers’ Fears Regarding Trump’s Golden Share Precedent in US Steel

This detailed report examines the concerns among dealmakers that the Trump administration’s use of a 'golden share' in the US Steel-Nippon Steel merger, finalized on June 13, 2025, could set a precedent for future transactions, potentially deterring foreign investment in US companies. The analysis is based on recent news articles and expert opinions, reflecting the current landscape as of June 18, 2025, at 01:09 AM PDT.

Background and Context

The merger between US Steel, an iconic American steelmaker, and Japan’s Nippon Steel had been in limbo for 18 months due to national security concerns. Initially blocked by the Biden administration, the deal gained approval under President Donald Trump on June 13, 2025, following the companies’ agreement to a national security pact. A key component of this pact is the issuance of a 'golden share'—a special class of preferred stock, termed Class G, to the US government. This golden share grants the government veto power over a wide range of corporate decisions, including $14 billion in promised investments, production and job transfers outside the US, plant closures, headquarters relocation from Pittsburgh, name changes, employee salaries, anti-dumping pricing, raw materials sourcing, and acquisitions.

Trump described this golden share as giving him "total control" over relevant US Steel business decisions, emphasizing its role in ensuring the company remains "controlled by the USA".

Dealmakers’ Fears and Reactions

Dealmakers and legal experts have expressed significant concerns that this golden share arrangement could set a precedent for future deals, particularly those involving foreign investment in strategic US industries. National security lawyers, including Joshua Gruenspecht from Wilson Sonsini, have voiced worries that foreign investors might question whether they will truly have control over the assets they acquire, potentially deterring investment in US companies .He highlighted the hypocrisy, stating that the US would object if China required similar conditions for a US company’s investment in China, underscoring the potential for reciprocal measures that could harm US interests abroad.

Aimen Mir, a deputy assistant secretary for investment security at the Treasury Department during previous administrations and now leading the CFIUS practice at Freshfields, warned that the notion of the US government taking an ownership interest to secure approval "opens up a new door," suggesting it could alter the landscape for foreign investment.

Precedent and Potential Implications

The golden share is not typical in acquisitions of US companies, as noted by CSIS, which traces its origins to the UK under Margaret Thatcher for privatized state-owned enterprises, and its use in countries like Brazil, Portugal, Italy, Spain, Germany, and China, though it waned in Europe after rulings by the European Court of Justice.

Dealmakers fear that this could become a model for other deals, especially in sectors deemed critical for national security. The Atlantic Council analysis suggests it reduces company value for other investors by limiting shareholder control, potentially increasing financing costs and reducing the attractiveness of US investment .

While a US official, speaking anonymously, stated that "This deal should not be seen as some sort of precedent that would affect the vast majority of cross-border M&A activity," the rarity of such measures and the high-profile nature of this deal could still influence future negotiations .

Detailed Breakdown of Golden Share Powers

To organize the specific powers granted by the golden share, the following table summarizes the veto powers and governance changes:

Aspect	Details
Investment Control	Veto power over $14 billion in promised investments by Nippon Steel over several years
Production and Jobs	Cannot transfer production or jobs outside the US without approval
Plant Operations	Cannot shutter factories without presidential consent
Headquarters Location	Cannot relocate headquarters from Pittsburgh without approval
Corporate Identity	Cannot change the company name without approval
Employee Salaries	Veto power over decisions affecting employee salaries
Pricing and Sourcing	Control over anti-dumping pricing and raw materials sourcing
Acquisitions	Veto power over acquisitions
Governance	Includes a board member appointed by the president and CFIUS-approved independent US Directors
Board Composition	Majority of US Steel’s board must be American, as per September 2024 term sheet

This table highlights the extensive control the government has, which is a significant departure from typical M&A practices and fuels dealmakers’ concerns.

Economic and Policy Implications

The economic impact of this precedent could be substantial. By limiting shareholder control, the golden share reduces the value of US Steel for other investors, potentially increasing financing costs and making US companies less attractive for foreign investment. This is particularly concerning given the global competition for capital, where countries like China and Europe might impose reciprocal measures, further complicating international dealmaking.

The policy implications include a potential shift towards greater government involvement in private sector operations, aligning with Trump’s broader economic nationalism agenda, as seen in his campaign to influence pricing decisions at companies like Walmart.

Conclusion and Future Outlook

Dealmakers’ fears are rooted in the potential for the US Steel golden share to set a precedent, introducing uncertainty and deterring foreign investment in US companies. The extensive veto powers and governance changes highlight the government’s significant influence, which could complicate future cross-border M&A activity. While officials claim it’s a rare case, the high-profile nature of this deal and expert concerns suggest it could influence future negotiations, potentially reducing the attractiveness of US investment and affecting global economic relations. Guidance from CFIUS and the president on the use of golden shares could mitigate these fears, but the current landscape indicates a shift towards greater state control in strategic industries.

Key Citations

• Golden share in U.S. Steel could scare off foreign investors Reuters

• ‘Golden Share’ in U.S. Steel Gives Trump Extraordinary Control New York Times

• Did Trump effectively nationalize US Steel with his ‘golden share’? Atlantic Council

• Understanding Trump’s Decision to Approve the Nippon Steel Deal CSIS

• The Allure (and Complications) of Trump’s “Golden Shares” New York Times

• U.S. Steel and Nippon Steel Say Their ‘Partnership’ Is Sealed New York Times

• What Trump’s ‘golden share’ in US Steel has in common with his plan to ‘watch’ Walmart Yahoo Finance

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