Every company exists in the political reality of their country. During elections, politicians have to say and do say things to try to win votes. After the election, the reality of economics comes into play. During the election, all political parties have a base to appeal to and they need to keep the easy votes. An example is a merger and acquisition target.

In an article by Josh Boak of the Associated Press, US President Joe Biden says he is opposed to the sale of US Steel to Nippon Steel of Japan.

In a political press release, Mr. Biden says US Steel has been an iconic American steel company for more than a century and it is vital for it remain an American steel company that is domestically owned and operated.

To digest to a brief history, Andrew Carnegie built US Steel to be the largest steel company in the world, but in 1982 reported a $852 million loss. To understand the reason, Clayton Christensen of Harvard University gave lessons on disruption. For example, in the steel industry, the recyclers started at the low end of steel, US Steel was not making money so it gave the market away. Through innovation the recyclers of steel could move up the value chain to greater margins, but US Steel had all the legacy costs and soon could not compete. Steel prices have gone up in the past couple years and now companies are making money.

Before Nippon Steel offer $14.1 billion in cash for the company, 2 smaller US companies had offered to buy US Steel.

Given this is election years, and the myth of dominance of US Steel is still around, politicians on both sides believe the merger should be blocked. The opponents are trying to invoke government regulations to slow down the merger.

Nippon Steel is advancing the arguments, it has been in the US producing steel since 1980; it would move its headquarters from Houston to Pittsburg; and among its steel operations are people in the United Steelworkers Workers (USW) and union contracts would continue with the merger. Nippon Steel also believed they could grow the business of US Steel with the introduction of electromagnetic steel sheet technologies.

Linking to dividend paying stocks, these companies are profitable and always looking to expand or do mergers. After studying the landscape and inspecting dozens of companies, a merger is announced, but sometimes the political landscape is missed. Fortunately, if the company really wants the candidate, they have the ability to wait until the political tea leaves are correct.

There are more questions than answers, till the next time – to raising questions.