Nippon Steel Faces Opposition from Unlikely Source
Nippon Steel’s ambitious $14.9 billion acquisition bid for U.S. Steel was already met with skepticism, particularly from the Biden administration, which questioned the deal’s implications for national security. However, recent revelations suggest that Nippon Steel was also facing opposition from a surprising source: Lourenco Goncalves, CEO of Cleveland-Cliffs. Goncalves, whose company had previously made a failed $7 billion bid for U.S. Steel, reportedly sought to undermine Nippon Steel’s acquisition efforts by casting doubt on the deal’s viability to investors.
Documents, including summaries from investor calls, show that Goncalves participated in at least nine separate calls with investors between March and December 2023, expressing his belief that President Biden would block the deal. According to these summaries, Goncalves was outspoken in his skepticism about the merger’s prospects, claiming that Biden would not allow it to go through. His comments were described as a deliberate attempt to dissuade investors and create doubt about the potential success of Nippon Steel’s acquisition.
Goncalves’ Comments and Their Impact
On one call held on March 13, 2023, Goncalves was quoted as saying, “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.” This was followed by a prediction that President Biden would soon block the deal, a forecast that came to fruition just a day later when the White House announced its opposition to the merger. Goncalves’ comments were not limited to just one instance; throughout 2024, he repeatedly voiced similar sentiments, sometimes before notable drops in U.S. Steel’s share price.
The ongoing efforts to influence the outcome of the deal raised questions about the influence of external parties on the merger process. However, Cleveland-Cliffs has declined to comment on the situation, and a representative for the company did not respond to requests for further clarification.
Political and Regulatory Challenges for the Deal
Nippon Steel’s bid for U.S. Steel was already a contentious matter in the political landscape. While the Japanese steelmaker offered double the value of Cleveland-Cliffs’ bid, promising to revitalize U.S. Steel’s aging infrastructure, the deal became a political football. Both President Biden and then-President-elect Donald Trump expressed their opposition to the merger, citing the importance of keeping U.S. Steel American-owned, particularly in Pennsylvania, where the company is headquartered.
Cleveland-Cliffs had previously raised concerns about antitrust issues surrounding a potential merger with U.S. Steel, particularly regarding the consolidation of steel supplies for the U.S. automotive industry. Despite these concerns, Goncalves continued to advocate for his own offer, while Nippon Steel’s bid struggled to gain traction amid political opposition.
While the Committee on Foreign Investment in the United States (CFIUS) had yet to reach a consensus on the deal by late December, the final decision was ultimately made by President Biden, who blocked the merger on national security grounds. Despite claims from Nippon Steel and U.S. Steel that political influence from the White House played a significant role in CFIUS’s decision, the White House maintains that the decision was made based on legitimate national security concerns and not due to external pressure from Goncalves or other parties.
