The News
Cleveland-Cliffs CEO Lourenco Goncalves has lined up financing for a US Steel takeover bid in the $8 billion range, bringing him closer to his longstanding goal of cornering the US steel industry, he told Semafor in an interview.
Goncalves declined to specify which banks had committed to the bid, which is well below what Japan’s Nippon Steel is offering in a deal that is now on the ropes after the Biden administration blocked it on national-security grounds. But he has been working with advisers from Moelis, JPMorgan, UBS, Truist and Wells Fargo on a proposal in the high $30s, people familiar with the matter said.
The CEO discussed his financing in an interview with Semafor immediately after a press conference which included a loving caress of one of six American flags behind him and ended with him belting out “America First,” a not-so-subtle homage to President-elect Donald Trump.
The company has been working with Nucor on a bid that would carve up US Steel, according to people familiar with the matter. The faded American steelmaker has been pressured for decades by an influx of cheaper, foreign steel and chronic underinvestment in its own factories.
Cleveland-Cliffs would make an all-cash bid for US Steel — “when, not if, the Nippon deal collapses,” Goncalves said in an interview Monday in a windowless conference room in Butler, Penn., next to Cliffs’ most profitable steel mill.
The plan currently being discussed calls for Cliffs taking US Steel’s blast furnaces and Nucor taking its more modern, electric furnaces in Arkansas, people familiar with the matter said. CNBC first reported the discussions. A successful bid would hinge on Nucor and Cleveland-Cliffs coming to an agreement on how to value US Steel’s Big River facility, which could be worth anywhere from $5 billion to more than $7 billion, according to some of the people.
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The Scene
Semafor spoke to Goncalves after an event putatively celebrating the five-year anniversary of Cliffs’ buying the Butler Works — the first step in its five-year journey to go toe-to-toe with US Steel. But it was actually a two-hour monologue aimed at an audience of one: Donald Trump, who could, once inaugurated, reverse Biden’s decision and revive the Nippon deal, or squash it and give Goncalves the opening he needs.
To start, the venue: just a few miles down the road from the where a gunman attempted to assassinate Trump in July. Six American flags framed Goncalves on stage and Semafor stumbled on an emergency stash of half-a-dozen more in a supply closet.
Over the course of the afternoon, Goncalves name dropped Vice President-elect JD Vance, who hails from Cliffs’ home state of Ohio, and Pennsylvania’s new Republican senator, David McCormick — who campaigned on keeping US Steel American-owned — as well as its Democratic Gov. Josh Shapiro and former White House Chief of Staff Rahm Emanuel.
The Cliffs’ chief also spoke glowingly about former US Trade Representative Robert Lighthizer — crediting him by name alongside Trump as a savior of the steel industry. Lighthizer isn’t expected to take a formal role in the administration, although a protégé, Jamieson Greer, is Trump’s pick for the trade spot.
Goncalves is himself being sued by US Steel and Nippon, which have accused him of corporate sabotage in trying to tank their merger. He doubled down Monday on controversial comments Nippon alleges he made in investor calls, suggesting that Nippon’s leadership should commit seppuku, or ritual suicide, and that they “did not learn anything since 1945.”
Rohan’s view
Cleveland-Cliffs may have the money lined up, but few deals these days fail for a lack of funds. Its remaining challenges include a dug-in US Steel board that loathes Goncalves and a target’s stock that has settled in the mid-$30s rather than the mid-$20s.
Short of shareholder pressure — and judging by the sharply positive moves in Nucor, Cliffs and US Steel shares Monday, shareholders certainly are watching — it has few levers to pull.
Another problem is valuing Big River. Nippon initially proposed to acquire US Steel’s mini-mills and other operations at a valuation of $9.2 billion, before making increasing offers to buy the whole company, according to proxy statements. US Steel is worth a lot less than it was worth when Nippon bid $55-a-share for it, so figuring out what price Nucor is willing to pay for Big River will be key.
The View From US Steel
Goncalves’ “remarks are another attempt to shift attention away from the illegal, monopolistic conspiracies he has engaged in – all in the face of declining performance at Cleveland-Cliffs,” a US Steel spokesperson said. “US Steel has a merger agreement with Nippon Steel and remains committed to completing it.”
Notable
- Nippon Steel’s nearly-failed pursuit of US Steel reaffirms the age-old aphorism: all politics is local, Jonathan Grady wrote in Nikkei.
- The Wall Street Journal’s editorial board decried the “corruption of CFIUS” as an “act of economic masochism.”