Written by Alexandra Alber
WASHINGTON (Reuters) – Although Nippon Steel Inc faced doubts over its doomed $14.9 billion bid to buy US Steel from the Biden administration, it was also facing headwinds from an unexpected source: the CEO of a rival bidder for the company who… He repeatedly cast doubt on the company. Transaction prospects for investors.
Lourenco Goncalves, CEO of steelmaker Cleveland-Cliffs (NYSE:), which made a failed $7 billion bid for US Steel in August 2023, has participated in at least nine calls to reassure investors that President Joe Biden will thwart the Nippon Steel merger. Months before he did so. And so on Friday, according to summaries of investor calls contained in a Dec. 17 letter from lawyers for Nippon Steel and US Steel to the Committee on Foreign Investment in the United States. (CFIUS) This was confirmed to Reuters by two participants in the calls.
“I can't force US Steel to sell to me, but I can work magic to close a deal that I don't agree not to close,” he told investors on a March 13 call hosted by JPMorgan. Goncalves was quoted as saying.
“It's not over yet, and Biden hasn't spoken yet. He will.”
The next day, Biden announced his opposition to this connection.
The Committee on Foreign Investment in the United States, which reviews foreign investments in the United States for national security risks, was unable to reach consensus on whether to greenlight the Nippon Steel deal, and referred the matter to Biden in late December, paving the way for it to take place. Friday.
Goncalves declined to comment, and a Cleveland Cliffs representative did not respond to a request for comment. Nippon Steel and the Treasury Department, which leads CFIUS, also declined to comment. US Steel said the company will continue to fight for this deal in response to questions related to this story. The White House said Goncalves and his comments played no role in Biden's decision to cancel the agreement. She said on Friday that the proposed purchase raises national security concerns.
JPMorgan declined to comment, but a note to clients summarizing its March 2024 industry conference mentions the event with Goncalves, saying “management reiterated its expectations that the deal will not close.” A participant on the call confirmed Goncalves' expectations that Biden would target the deal soon.
While Goncalves made similar comments about the deal to analysts on three earnings calls this year, his own statements made throughout 2024 about the deal process show the extent of his efforts to cast doubt on Nippon's bid for US Steel. His comments were sometimes preceded by declines in US Steel's stock price, Nippon Steel and US Steel told Committee on Foreign Investment in the United States.
The Cleveland Cliffs have previously expressed interest in making another offer.
The steelmaker, led by Brazilian-born Goncalves for more than a decade, has made an unsolicited bid for US Steel with the support of the United Steelworkers union, arguing that the companies combined “will create a lower-cost, more innovative and stronger domestic community.” provider.”
But US Steel has raised concerns that a tie-up with Cleveland-Cliffs could risk being shot down by antitrust regulators because it would consolidate steel supplies to US automakers and put up to 95% of US iron ore production under the control of a single company. US Steel's board of directors rejected the offer.
Nippon Steel's all-cash offer in December was valued at twice the Cleveland-Cliffs price, and Nippon later promised to revitalize US Steel's old plants with investment from an allied nation.
But the offer has become politicized, with both Biden and Republican President-elect Donald Trump vowing to cancel the deal as they seek to woo voters in the swing state of Pennsylvania where US Steel is headquartered.
Both Trump and Biden emphasized that the company should remain American-owned after USW President David McCaul expressed opposition to the tie-up.
Biden's objections led to “unpermitted and undue influence” by the White House on the Committee on Foreign Investment in the United States' national security review of the deal, the two companies alleged in a letter obtained by Reuters last month that also included summaries of investor calls with Goncalves.
The previously contentious Committee on Foreign Investment in the United States was weighing the merits of the deal Goncalves was discussing.
In a March 15 call with a major investor in US Steel that was confirmed by a participant on the call, he said: “[There]is no process. This is not going to be a process. CFIUS is just a cover for the president to kill the deal.” CFIUS “In the United States it is a group of bureaucrats, second and third levels, within the Cabinet…that means the president can do whatever he wants.”
