WASHINGTON, D.C.: This week, President Donald Trump signed an executive order that facilitates Nippon Steel's potential investment in U.S. Steel, provided that the Japanese firm adheres to a "national security agreement" set forth by the federal government. The specifics of this agreement were not disclosed in the order.

In a joint statement, U.S. Steel and Nippon Steel confirmed that the agreement mandates approximately US$11 billion in new investments by 2028 and grants the U.S. government a "golden share," which essentially provides veto power to safeguard national security interests against any reductions in steel production.

The companies expressed gratitude to President Trump and his administration for their decisive leadership and backing of this significant partnership. They anticipate that this collaboration will yield substantial investments that benefit communities and families for generations. They are eager to act on their promises to revitalize American steelmaking and manufacturing.

Both companies have successfully undergone a review by the U.S. Department of Justice and have secured all necessary regulatory approvals. They expect to finalize the partnership soon.

In after-hours trading on June 13, shares of U.S. Steel rose $2.66, or five percent, to $54.85. Nippon Steel's initial bid to acquire U.S. Steel had been priced at $55 per share.

Details concerning the implementation of the golden share, as well as additional provisions within the security agreement and the allocation of the $11 billion investment, remain sparse. White House spokesman Kush Desai emphasized that the order ensures U.S. Steel's continued operations in Pennsylvania, reinforcing its role as a vital component of national and economic security.

James Brower, a lawyer at Morrison Foerster who works on national security issues, noted that these agreements are typically kept confidential, particularly by the government, but may be disclosed publicly by the involved companies.

The national security agreement will dictate the mechanics of how a golden share operates, and it's common for such agreements to grant the government approval rights over specific company actions.

Despite U.S. Steel not filing with the U.S. Securities and Exchange Commission this week, Nippon Steel's initial offer to buy the Pittsburgh-based company for nearly $15 billion was delayed due to national security concerns that originated during President Biden's term.

To secure American approval, Nippon Steel progressively increased its investment commitment to U.S. Steel, and American officials now estimate the overall value of the transaction at $28 billion. This figure includes both the acquisition bid and a new electric arc furnace that Nippon Steel plans to construct in the U.S. post-2028.

Nippon Steel has committed to keeping U.S. Steel's headquarters in Pittsburgh, establishing a board with a majority of American members in control, and maintaining plant operations. It also promised to protect U.S. Steel's interests in trade and refrain from importing steel slabs that could compete with its production in Pennsylvania and Indiana.

During his campaign, Trump criticized the purchase, and Biden initially blocked the transaction before leaving office. However, upon returning to the presidency in January, Trump expressed a willingness to negotiate an arrangement.

Trump mentioned that as president, he would retain "total control" over U.S. Steel's activities linked to this investment. He asserted that the deal would maintain "51 percent ownership by Americans," even though Nippon Steel has aimed to acquire U.S. Steel as a wholly owned subsidiary.

He added that he possesses control over the golden share and conveyed some concern regarding the control that future presidents might exert.

The proposed merger has been under scrutiny by the Committee on Foreign Investment in the United States (CFIUS) during both the Trump and Biden administrations. The executive order noted that the CFIUS review offered "credible evidence" that Nippon Steel "might take action that threatens to impair the national security of the United States." However, these risks could be "adequately mitigated" by approving the national security agreement.

The order lacks details about the specific national security risks and instead outlines a timeline for the security agreement. The White House has not provided further information regarding the agreement's terms. According to the order, the draft agreement was shared with U.S. Steel and Nippon Steel, and both companies must successfully implement it in accordance with the directives of the Treasury Department and other CFIUS members by the transaction's closing date. Trump retains further authority to make related decisions under the order signed on June 13.