Goncalves’ Machinations: The Unseen Hand Behind the Nippon Steel-U.S. Steel Deal
The $14.9 billion bid by Nippon Steel for U.S. Steel, though ambitious, was always likely to face strong resistance from various quarters. Among the most influential opponents was Lourenco Goncalves, the CEO of Cleveland-Cliffs, a rival steelmaker. Goncalves had his own plans for U.S. Steel and, according to numerous reports, worked relentlessly behind the scenes to sow doubt about the merger between Nippon Steel and U.S. Steel, particularly among investors. His actions played a pivotal role in shaping the political and economic environment that led to President Joe Biden’s decision to block the deal in early January 2025.
Cleveland-Cliffs: A Rival Bidder with a Lot to Gain
Cleveland-Cliffs had already made its own bid for U.S. Steel in August 2023, offering a $7 billion deal that was ultimately rejected by U.S. Steel's board. Despite this failure, Goncalves and Cleveland-Cliffs remained committed to pursuing U.S. Steel in the future. The company had the backing of the United Steelworkers union and argued that the merger would create a more competitive steel supplier for the U.S., lowering costs and increasing innovation. However, U.S. Steel raised concerns over antitrust issues, particularly the potential for Cleveland-Cliffs to control 95% of U.S. iron ore production, and rejected the offer.
With Cleveland-Cliffs' bid thwarted, Goncalves turned his focus to undermining Nippon Steel’s bid, hoping to position his company as the natural acquirer of U.S. Steel. As he worked to convince investors that the Nippon Steel deal was doomed, he played a complex game of corporate strategy, timing his remarks to coincide with fluctuations in U.S. Steel’s stock price.
Casting Doubt on Nippon Steel’s Prospects
Goncalves made his views on the Nippon Steel acquisition clear during multiple investor calls throughout 2024. He consistently predicted that President Biden would block the deal, even before Biden publicly made his opposition known in late December 2024. According to a December 17 letter to the Committee on Foreign Investment in the United States, Goncalves participated in at least nine calls where he expressed his certainty that the deal would fail.
In one such call on March 13, 2024, hosted by JP Morgan, Goncalves directly told investors, “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.” His prediction proved accurate the next day when Biden announced his opposition to the merger.
The Impact on U.S. Steel’s Stock Price
The effect of Goncalves’ comments on U.S. Steel’s stock price cannot be ignored. According to the letter from Nippon Steel and U.S. Steel’s lawyers, Goncalves’ remarks sometimes preceded significant drops in U.S. Steel’s share price, further shaking investor confidence in the Nippon Steel deal. This created a volatile market environment that was far from conducive to the success of the proposed merger.
Investor sentiment is crucial in large mergers, and the repeated public predictions of failure by Goncalves likely contributed to the sense of inevitability that surrounded the deal’s collapse. Even as Nippon Steel attempted to make its case to U.S. regulators and the public, Goncalves’ behind-the-scenes efforts to discredit the deal were starting to have a tangible impact on U.S. Steel’s financial performance.
