Golden share in US Steel could scare off foreign investors in US deals, lawyers say

Commerce Secretary Howard Lutnick announced on Saturday, "President Trump has secured a perpetual Golden Share as part of Nippon Steel’s acquisition of U.S. Steel," listing a raft of corporate decisions that the Trump administration would now have veto power over.

Shares of U.S. Steel rose 5% on Monday to hit $54.85 a share, approaching Nippon Steel's $55 per share offer price, as investors bet the Japanese firm's fraught $14.9-billion bid for the struggling company would soon reach the finish line.

But the Trump administration's move to include the golden share in the national security agreement was an unusual choice, and would make foreign investors wary, according to Joshua Gruenspecht, a national security lawyer with Wilson Sonsini.

"It leads to the question of, 'Am I going to get what I bought? Do I actually get control of this asset?'" he said.

A U.S. official left the door open to the Trump administration requiring a golden share again, but only rarely, saying, "This deal should not be seen as some sort of precedent that would affect the vast majority of cross-border M&A activity." The official spoke on condition of anonymity because they were not authorized to speak publicly.

Nippon Steel declined to comment. U.S. Steel, the White House, Commerce and the Treasury Department, which leads the Committee on Foreign Investment in the U.S. that scrutinizes foreign investments for national security risks, did not immediately respond to requests for comment.

'RISKY AND UNPRECEDENTED'

The Trump administration gave a green light to the merger on Friday via an executive order and a signed agreement to assuage national security concerns, capping off a tumultuous 18-month effort.

But questions had swirled about the golden share President Donald Trump had suggested gave the American people a 51% stake in the struggling U.S. firm as part of the acquisition.

In his Saturday post, Lutnick said the share would prevent the companies from reducing or delaying $14 billion in promised investments, transferring production or jobs outside the United States, or closing or idling plants before certain time frames, without the president's consent.

The share also gives the government a veto over a potential relocation of U.S. Steel's headquarters from Pittsburgh, Pennsylvania, a transfer of jobs overseas, a name change, as well as other protections relating to "employee salaries, anti-dumping pricing, raw materials and sourcing outside the U.S., acquisitions, and more," Lutnick added.

That power is conferred via a single share of preferred stock, called Class G for "gold," and is bolstered by a board member directly appointed by the president, the U.S. official said, confirming a report by the New York Times.

Lawyers consulted by Reuters said it was not outside the norm for CFIUS to require in an NSA that certain board members be approved by the committee. But to have one beholden to the president appeared to be a new approach.

"A golden share approach is both risky and unprecedented," said Jim Secreto, a former Treasury and Commerce official, adding that the United States would cry foul if Beijing required something similar to approve a U.S. company's investment in a Chinese firm. "Trump's dealmaking introduces uncertainty for global investors and sets a precedent that could complicate future cross-border deals."

Even before Trump got involved, the companies had offered significant authority to the U.S. government. In a national security agreement term sheet proposed to the CFIUS in September 2024 and obtained by Reuters, Nippon Steel pledged that a majority of U.S. Steel's board members would be American, and that three of them - known as the "independent U.S. Directors" - would be approved by CFIUS.

"U.S. Steel may reduce Production Capacity if and only if it is approved by a majority of the Independent U.S. Directors," the term sheet stated, adding that core U.S. managers will be U.S. citizens.