By Alexandra Alper
WASHINGTON (Reuters) – Even as Nippon Steel faced skepticism over its failed $14.9 billion bid for US Steel from the Biden administration, it also faced headwinds from an unlikely source: the chief executive of a rival bidder to the company. company that repeatedly cast doubt on the deal's prospects to investors.
Lourenco Goncalves, CEO of steelmaker Cleveland-Cliffs (NYSE:), which made an unsuccessful $7 billion bid for US Steel in August 2023, participated in at least nine calls assuring investors that President Joe Biden would ruin the Nippon Steel merger months before it did. It did so on Friday, according to summaries of investor calls included in a December 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 me, but I can work my magic to close a deal I don't agree with and not close,” he told investors on a March 13 call hosted by JP Morgan, the letter cited Gonçalves. saying.
“It's not done yet and Biden hasn't spoken yet. He will.”
The next day, Biden announced his opposition to the alliance.
CFIUS, which examines foreign investments in the United States for national security risks, could not reach a consensus on whether to greenlight the Nippon Steel transaction and referred the matter to Biden in late December, setting the stage. for your Friday block.
Gonçalves declined to comment and a representative for Cleveland-Cliffs did not respond to a request for comment. Nippon Steel and the Treasury Department, which runs 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 Gonçalves nor his comments influenced Biden's decision to kill the deal. He said Friday that the proposed purchase presented national security concerns.
JP Morgan declined to comment, but a note to clients summarizing its March 2024 industry conference mentions the event with Gonçalves and says “management reiterated its expectation that the deal will not close.” A participant on the call confirmed Goncalves' forecast that Biden would soon target the deal.
While Goncalves made similar comments about the deal to analysts on three earnings calls this year, his private comments 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 declines in US Steel's share price, Nippon Steel and US Steel told CFIUS.
Cleveland-Cliffs have previously expressed interest in making another offer.
The steelmaker, which has been led by Brazilian Gonçalves for more than a decade, made the unsolicited offer for US Steel with the support of the United Steelworkers union, arguing that the combined companies would “create a lower-cost, more innovative and innovative domestic industry.” stronger.” supplier.”
But US Steel expressed concern that an alliance with Cleveland-Cliffs risked rejection 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 December cash offer was valued at twice the price of Cleveland-Cliffs, and Nippon later promised to revitalize former US Steel plants 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 courted voters in the swing state of Pennsylvania, where US Steel is headquartered.
Both Trump and Biden said the company should remain US-owned after USW President David McCall expressed opposition to the alliance.
Biden's objections led to “impermissible undue influence” by the White House in CFIUS's national security review of the alliance, the companies alleged in a letter obtained by Reuters last month that also contained summaries of the calls. of investors with Gonçalves.
Gonçalves previously questioned whether CFIUS was considering the merits of the deal.
In a March 15 call with a major investor in US Steel, confirmed by a call participant, he said: “There is no process here. This will not be a process. CFIUS is just a cover for a president to nullify an agreement. “The CFIUS is a group of bureaucrats, second and third level, within the cabinet… It means that the president can do whatever he wants.”
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