Washington: As Nippon Steel grappled with challenges from the Biden administration over its $14.9 billion bid for U.S. Steel, another unexpected adversary emerged: Cleveland-Cliffs CEO Lourenco Goncalves. According to allegations in legal documents, Goncalves actively worked to undermine the deal by sowing doubt among investors, claiming President Joe Biden would block the merger.
Goncalves’ Alleged Efforts to Disrupt the Deal
Goncalves, whose company had unsuccessfully bid $7 billion for U.S. Steel in 2023, reportedly held at least nine calls with investors to cast doubt on Nippon Steel’s acquisition. In a March 13 investor call hosted by JP Morgan, he allegedly said, “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. It’s not closing, and Biden hasn’t spoken yet. He will.”
The following day, President Biden publicly opposed the Nippon Steel deal.
These claims were outlined in a letter from lawyers representing Nippon Steel and U.S. Steel to the Committee on Foreign Investment in the U.S. (CFIUS) on December 17, 2024. While CFIUS could not reach consensus on the national security implications of the deal, it referred the matter to Biden, who blocked the transaction.
Mixed Reactions and Declined Comments
Cleveland-Cliffs, Nippon Steel, U.S. Steel, and government representatives declined to comment directly on the allegations. The White House maintained that Goncalves’ remarks had no influence on Biden’s decision, which it said was based on national security concerns.
JP Morgan also declined to comment, although a note to clients acknowledged that Goncalves had expressed doubts about the deal during its March 2024 industrials conference.
Nippon Steel’s Higher Bid and Challenges
Nippon Steel’s all-cash offer in December 2024 was double the value of Cleveland-Cliffs’ previous bid and included promises to modernize U.S. Steel’s aging mills with support from Japan, an allied nation. Despite these advantages, the deal became politically contentious, with both President Biden and President-elect Donald Trump opposing it.
The opposition stemmed in part from U.S. Steel’s strategic significance and its location in Pennsylvania, a politically critical swing state. The United Steelworkers (USW) union also opposed the Nippon Steel merger, arguing that U.S. Steel should remain under American ownership.
Cleveland-Cliffs’ Position and Antitrust Concerns
Cleveland-Cliffs has a long-standing interest in acquiring U.S. Steel and previously claimed that a merger would create a more competitive and innovative domestic steel supplier. However, U.S. Steel raised concerns about potential antitrust violations, citing the risk of excessive market concentration in the automotive and iron ore sectors.
Allegations of White House Influence
The legal documents also allege that Biden’s opposition to the deal constituted “impermissible undue influence” over the CFIUS review process. Goncalves had previously dismissed the legitimacy of CFIUS, calling it “a cover for a President to kill a deal.”
The Larger Implications
The controversy surrounding Nippon Steel’s bid highlights the complex intersection of business competition, national security, and politics. While Nippon Steel sought to present its offer as a mutually beneficial arrangement, the deal faced resistance from domestic political interests, unions, and rival firms.
As the battle over U.S. Steel continues, this case underscores the challenges foreign investors face when navigating U.S. regulatory and political landscapes. At the same time, it raises questions about the extent to which corporate leaders can influence high-stakes mergers and acquisitions.