By Alexandra Alper
WASHINGTON (Reuters) - Even as Nippon Steel faced skepticism of its doomed $14.9 billion bid for U.S. Steel from the Biden administration, it was also contending with headwinds from an unlikely source: the CEO of a rival bidder for the firm who repeatedly cast doubt on the deal's prospects to investors.
Lourenco Goncalves, CEO of steelmaker Cleveland-Cliffs (NYSE:CLF), which made a failed $7 billion bid for U.S. Steel in August 2023, participated in at least nine calls assuring investors that President Joe Biden would scuttle the Nippon Steel merger months before he did so on Friday, according to summaries of investor calls included in a Dec. 17 letter from lawyers for Nippon Steel and U.S. Steel to the Committee on Foreign Investment in the U.S. (CFIUS) and confirmed to Reuters by two participants in the calls.
“I can’t force U.S. Steel to sell to me, but I can work my magic to make a deal that I don’t agree with not to close," he told investors on a March 13 call hosted by JP Morgan, the letter quoted Goncalves as saying.
"It’s not closing, and Biden hasn’t spoken yet. He will."
The next day, Biden announced his opposition to the tie-up.
CFIUS, which reviews foreign investments in the U.S. for national security risks, could not reach consensus on whether to greenlight the Nippon Steel transaction and referred the matter to Biden in late December, setting the stage for his Friday block.
Goncalves declined to comment and a representative from Cleveland-Cliffs did not respond to a request for comment. Nippon Steel and the Treasury Department, which leads CFIUS, also declined to comment. U.S. Steel said the company will continue to fight for this deal in response to questions for this story. The White House said neither Goncalves nor his comments played a role in Biden's decision to kill the deal. It said on Friday that the proposed purchase presented national security concerns.
JP Morgan declined to comment, but a note to clients summarizing its March 2024 industrials conference mentions the event with Goncalves, saying "management reiterated its expectation that the deal will not close." A participant in the call confirmed Goncalves' forecast Biden would soon take aim at the deal.
While Goncalves made similar comments about the deal to analysts on three earnings calls this year, his private remarks made throughout 2024 about the deal process show the extent of his effort to cast doubt on Nippon's bid for U.S. Steel. His comments sometimes preceded drops in the U.S. Steel share price, Nippon Steel and U.S. Steel told CFIUS.
Cleveland-Cliffs has previously expressed interest in making another bid.
The steelmaker, which has been led by Brazilian-born Goncalves for over a decade, made the unsolicited bid for U.S. Steel with support from the United Steelworkers union, arguing the companies combined would "create a lower-cost, more innovative, and stronger domestic supplier."
But U.S. Steel raised concerns a tie-up with Cleveland-Cliffs risked being shot down by antitrust regulators because it would consolidate the supply of steel to U.S. automakers and put up to 95% of U.S. iron ore production under the control of one company. U.S. Steel's board rejected the offer.
Nippon Steel's December all-cash offer was valued at twice Cleveland-Cliffs' price, and Nippon later promised to revitalize U.S. Steel's aging mills with investment from an allied nation.
But the offer became politicized, with both Biden and Republican President-Elect Donald Trump pledging to kill the deal as they wooed voters in the swing state of Pennsylvania where U.S. Steel is headquartered.
Trump and Biden both asserted the company should remain American-owned after USW President David McCall expressed his opposition to the tie-up.
Biden's objections led to "impermissible undue influence" from the White House on CFIUS's national security review of the tie-up, the companies alleged in a letter obtained by Reuters last month that also contained the summaries of the investor calls with Goncalves.
Goncalves previously disputed CFIUS was considering the merits of the deal.
In a March 15 call with a top investor in U.S. Steel confirmed by a participant in the call, he said, “ (T)here’s no process. This is not going to be a process. CFIUS is just cover for a President to kill a deal. CFIUS is a bunch of bureaucrats, second and third level, inside the cabinet...It means the President can do whatever he wants."