In rare deal for US, government owns a piece of US Steel

The government is now a part owner of US Steel, receiving a single preferred share in the company in a rare provision of a merger agreement with Japan-based Nippon Steel, according to Securities and Exchange Commission documents.

The partnership, which was formalized on June 18, gives the US government the right to appoint an independent director, close or idle existing US Steel facilities, change the company name and move its headquarters as part of its ownership through a golden share.

US Steel and Nippon also entered into a national security agreement with the US government as part of the agreement.

The merger culminated a yearslong pursuit of US Steel by the Japanese company that had been opposed by all three presidential candidates in 2024. President Donald Trump flip-flopped on the acquisition, approving it on June 13.

Experts say the issuance of a golden share is unprecedented.

"It is not normal for the government to get shares in companies it reviews including through a golden share," David Plotinsky, an attorney who served as the former acting chief of the Justice Department's Foreign Investment Review Section, said in a statement to Platts, a part of S&P Global Commodity Insights.

The golden share

Golden shares, which are rarely used in the US but more common in Europe, grant a measure of governmental control to private companies.

US Steel will issue one share of Class G preferred stock – referenced in the agreement as the golden share -- to the US government.

The Class G stock is not a common, publicly traded share, said Stephen Heifetz, a national security and trade attorney who previously served as an official at the Committee on Foreign Investment in the United States.

Antonia Tzinova, a national security attorney at Holland & Knight, described the golden share as an active involvement of the US government in the management of a private equity.

"That means the government literally owns equity, even if it's nominal," she said.

"This is new in the sense that it's structured in a way that typically, I haven't seen in the US," she added.

As part of the national security agreement and through the ownership of the golden share, the US government will have the right to appoint one independent director, the companies said in the deal announcement on June 18.

Plotinsky said he is not aware of any examples where a company has issued stock to the US government.

"The G share will not involve any equity, I gather, but rather just be the hook to get the director," he said.

Presidential rights

Trump will have designated consent rights over company actions as part of the agreement requiring his written consent -- or the written consent of his selected designee -- while serving as president, according to the certificate of incorporation.

At other times, the "written consent of the CMAs [CFIUS monitoring agencies]" represented by the Department of Treasury and the Department of Commerce is required.

This prevents US Steel from changing the company name, moving its headquarters or reducing capital investments without the consent of Trump or his designee, the certificate says.

US Steel also cannot make material changes to the corporation's existing raw materials and steel sourcing strategy in the US, unless changes benefit the corporation in cases where raw materials are inadequate or imports accelerate technology transfers of facilities built in the US.

Direct presidential involvement in CFIUS mitigation agreements is virtually unprecedented, Heifetz said. But the consequences may not differ from typical agreements.

"I think one could argue that that doesn't really matter because the CFIUS agencies ultimately report to the president," he said. "But the direct presidential involvement - that is unique."

Required investments

In addition to its $14.2 billion purchase of the company, Nippon will make nearly $11 billion in new investments in US Steel by 2028, a rarely seen requirement in this kind of merger.

It also lists specific provisions that prevent the closure, idling or sale of an Illinois steel plant at Granite City Works prior to June 18, 2027. Nippon cannot close, idle or sell any other US Steel location prior to June 18, 2035, per the agreement.

Both have exceptions for temporary idling facilities or an Act of God event.

Plotinsky said he is not aware of a CFIUS case requiring capital expenditures as part of the mitigation terms.

"I think the question for investors and for US companies that might need the foreign investment is: Is that going to become part of the CFIUS playbook?" Plotinsky said.

Pricing requirements

The agreement bars the companies from implementing average spot sales pricing below 85% of the six-month average of the index during any rolling six-month period, said Ali Oktay, US ferrous metals senior analyst for S&P Global Commodity Insights.

Spot sales represented 24% of US Steel's total sales in the flat-rolled segment and 44% in the mini mill segment, according to the company's 2024 earnings report.

"This provision would prevent the company from selling at significantly lower prices than the market; however, the current contract structure already limits this possibility," Oktay said. "A notable portion of volumes are sold at fixed prices, primarily in the automotive sector, while market-based sales are tied to indices already."

Platts, part of Commodity Insights, assessed TSI US HRC EXW Indiana at $865/st as of June 25.

'Stringent, but by no means unprecedented'

Several CFIUS attorneys said the national security provisions in the deal frequently appear in CFIUS mitigation agreements.

"It's certainly unique, although probably not as much so as people think," Plotinsky said.

A 2023 CFIUS annual report to Congress listed mitigation measures that mirror many of the provisions in the partnership, including ensuring operations are located only in the US, restricting and hiring of certain personnel, appointing a government-approved member of the board of directors, and assuring the continuity of supply to the government.

"What the mitigation agreement is trying to accomplish through this golden share mechanism in many ways is not that different from what CFIUS often does," Plotinsky said.

Disqualified individuals

The incorporation agreement also includes a section that bars certain individuals from serving as Trump's designee.

This includes any individual affiliated with or acting on behalf of Ancora Holdings Group, an investment management company and shareholder of US Steel.

Ancora called to replace US Steel's current CEO and leadership team in February 2025, stating that the board "can't be trusted to save US Steel."

One of Ancora's recommendations to replace leadership was former Stelco Holdings CEO Alan Kestenbaum, who is listed with the president of Ancora subsidiary Ancora Alternatives James Chadwick and Ancora CEO Fred DiSanto as disqualified individuals in the US Steel-Nippon deal.