Alexandra Alper
WASHINGTON (Reuters) – Even as the Biden administration faces skepticism over its doomed $14.9 billion bid to buy U.S. Steel, Nippon Steel has also been battling headwinds from an unlikely source: the CEO of a rival bidder for the company. , who has repeatedly questioned the prospects of the deal for investors.
Lorenzo Goncalves, CEO of steelmaker Cleveland-Cliffs (NYSE:), which made an unsuccessful $7 billion bid for US Steel in August 2023, was on at least nine calls assuring investors that President Joe Biden would scuttle the Nippon merger Steel a few months before he did it. So on Friday, according to a summary of investor calls included in a Dec. 17 letter from lawyers for Nippon Steel and US Steel to the Committee on Foreign Investment in the United States. (CFIUS) and confirmed to Reuters by two participants in the conversation.
“I can’t force US Steel to sell to me, but I can work my magic to get a deal done that I don’t agree not to close,” he told investors in a March 13 call arranged by JP Morgan in a letter. quotes Gonsalves as saying.
“It’s not closing, and Biden hasn’t spoken yet. He will do it.”
The next day, Biden announced his opposition to the agreement.
CFIUS, which reviews foreign investment in the U.S. for national security risks, was unable to reach a consensus on whether to greenlight the Nippon Steel deal and referred the issue to Biden in late December, setting the stage for his Friday block.
Gonsalves declined to comment, and a Cleveland-Cliffs spokesman did not respond to a request for comment. Nippon Steel and the Treasury Department, which heads CFIUS, also declined to comment. In response to questions for this article, US Steel said the company will continue to fight for the deal. The White House said neither Gonsalves nor his comments played a role in Biden’s decision to end the deal. The company said Friday that the proposed purchase poses a national security threat.
JP Morgan declined to comment, but a note to clients summarizing a March 2024 industry conference mentioned an event with Gonsalves, saying “management reiterated its expectation that the deal will not close.” One person on the call confirmed Gonsalves’ prediction that Biden would soon set his sights on a deal.
While Gonsalves made similar comments about the deal to analysts during three earnings conference calls this year, his private remarks throughout 2024 about the deal process show the extent of his efforts to cast doubt on Nippon’s bid for US Steel. His comments sometimes preceded declines in US Steel’s stock price, CFIUS Nippon Steel and US Steel said.
Cleveland-Cliffs has previously expressed interest in submitting another bid.
The steel company, which has been led by Brazilian native Goncalves for more than a decade, made an unsolicited bid to buy US Steel with the support of the United Steelworkers union, arguing that combining the companies would “create a cheaper, more innovative and stronger domestic economy.” supplier.”
But U.S. Steel has expressed concern that the tie-up with Cleveland-Cliffs could be criticized by antitrust regulators because it would consolidate steel supplies to U.S. automakers and put up to 95% of U.S. iron ore production under the control of one company. The US Steel board rejected the proposal.
Nippon Steel’s December offer, paid entirely in cash, was valued at twice Cleveland-Cliffs’ price, and Nippon later promised to revitalize U.S. Steel’s aging plants with investment from the allied nation.
But the proposal has become politicized, with both Biden and Republican President-elect Donald Trump vowing to kill the deal as they court voters in the swing state of Pennsylvania, where US Steel is headquartered.
Trump and Biden said the company should remain American-owned after USW President David McCall expressed his opposition to the merger.
Biden’s objections resulted in “unacceptable improper influence” by the White House over CFIUS’s national security review of the entity, the companies argued in a letter obtained by Reuters last month that also contained a summary of investors’ conversations with Gonsalves.
Goncalves has previously disputed that CFIUS is reviewing the merits of the deal.
During a March 15 call with a lead US Steel investor who was confirmed by the call participant, he said: “(There) is no process here. It won’t be a process. CFIUS is just a cover for the President to sabotage the deal. CFIUS is a bunch of second- and third-level bureaucrats inside the cabinet… That means the president can do whatever he wants.”