Rival CEO spread doubt about Nippon Steel deal prospects to Wall St, documents allege

WASHINGTON - Even as Japan’s Nippon Steel faced scepticism over its

doomed US$14.9 billion (S$20.4 billion) bid for US Steel

from the Biden administration, it was also contending with headwinds from an unlikely source – the chief executive of a rival bidder for the firm who repeatedly cast doubt on the deal’s prospects to investors.

Mr Lourenco Goncalves, CEO of steelmaker Cleveland-Cliffs, which made a failed US$7 billion bid for US 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 Jan 3, according to summaries of investor calls.

The summaries were included in a Dec 17 letter from lawyers for Nippon Steel and US Steel to the Committee on Foreign Investment in the US (CFIUS), and confirmed to Reuters by two participants in the calls.

“I can’t force US 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 Mr Goncalves as saying. “It’s not closing, and Biden hasn’t spoken yet. He will.”

The next day, Mr Biden announced his opposition to the tie-up.

CFIUS, which reviews foreign investments in the US for national security risks, could not reach consensus on whether to green-light the Nippon Steel transaction and referred the matter to Mr Biden in late December, setting the stage for his Jan 3 block.

Mr 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.

US Steel said the company will continue to fight for this deal in response to questions for this story.

The White House said neither Mr Goncalves nor his comments played a role in Mr Biden’s decision to kill the deal. It said on Jan 3 that the proposed purchase presented national security concerns.

JP Morgan declined to comment, but a note to clients summarising its March 2024 industrials conference mentions the event with Mr Goncalves, saying “management reiterated its expectation that the deal will not close”. A participant in the call confirmed Mr Goncalves’ forecast that Mr Biden would soon take aim at the deal.

While Mr Goncalves made similar comments about the deal to analysts on three earnings calls in 2025, his private remarks made throughout 2024 about the deal process show the extent of his effort to cast doubt on Nippon’s bid for US Steel.

His comments sometimes preceded drops in the US Steel share price, Nippon Steel and US 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 US Steel with support from the United Steelworkers (USW) union, arguing that the companies combined would “create a lower-cost, more innovative and stronger domestic supplier”.

But US Steel raised concerns that a tie-up with Cleveland-Cliffs risked being shot down by antitrust regulators because it would consolidate the supply of steel to US carmakers and put up to 95 per cent of US iron ore production under the control of one company. US 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 revitalise US Steel’s ageing mills with investment from an allied nation.

But the offer became politicised, with both Mr Biden and Republican President-elect Donald Trump pledging to kill the deal as they wooed voters in the swing state of Pennsylvania where US Steel is headquartered.

Trump and Mr Biden both asserted the company should remain American-owned after USW president David McCall expressed his opposition to the tie-up.

Mr Biden’s objections led to “impermissible undue influence” from the White House on CFIUS’ national security review of the tie-up, the companies alleged in a letter obtained by Reuters in December that also contained the summaries of the investor calls with Mr Goncalves.

Mr Goncalves previously disputed CFIUS was considering the merits of the deal.

In a March 15 call with a top investor in US Steel confirmed by a participant in the call, he said: “There’s no process. This is not going to be a process. CFIUS is just a 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.” REUTERS