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U.S. Steel is just one of those companies. Ranked No. 186 on the Fortune 500, it was founded all the way back in 1901 from the merger of several giants in the steel city of Pittsburgh in a deal involving Andrew Carnegie, J.P. Morgan, and Charles Schwab. It was the first $1 billion company in American history, on top of holding a record as the largest IPO of all time, and was created from a $492 million deal that would be valued at over $17 billion today, minting some 50 to 100 millionaires in the process.
Now you can add another big name to the long history of U.S. Steel, if perhaps only for a week or two: Lourenco Goncalves, CEO of the firm from Ohio that ranks number 170 on the Fortune 500.
The loquacious Brazilian is CEO of Cleveland-Cliffs, a metals firm he took from loss-making and heavily indebted to strong enough to table a $7.2 billion bid for the historic national champion. The former engineer is known for castigating analysts and short-sellers alike and making risky and splashy acquisitions, but also for revitalizing a long-dormant industrial firm while cultivating a reputation as a particularly union-friendly executive. But this deal would boost his profile considerably—if not etch his name into history along with the Carnegies and Morgans of the financial universe.
A closer look at the man behind the bid shows a willingness to do—and say—almost anything to take his business to the top.
His tenure as Cleveland-Cliffs CEO has been a journey from the red to the black. When he took over the 176-year-old scrap metal firm in 2014, the company ended the year with revenues of $4.6 billion and a loss of $8.3 billion. By the end of last year, revenues had quintupled to $23 billion, while profits stood at $1.4 billion.
Cleveland-Cliffs’ offer to acquire U.S. Steel was first made in July, the market has now been informed, and it values U.S. Steel shares at $35, a 43% premium on Friday’s closing price of $22.72. The market roared its approval on Monday, sending shares up nearly 37% to $31.08. Goncalves said his offer was rebuffed as “unreasonable,” but he is confident of closing it to create what Cleveland-Cliffs estimates would be the only American steel company in the world’s top 10, according to a press release issued on Sunday. For its part, U.S. Steel has hired a bevy of advisors and launched a review of strategic alternatives, while disclosing it received multiple unsolicited offers for all or parts of the company, including from Goncalves.
Goncalves, a veteran of the steel industry in both his native Brazil and the U.S., has been on an acquisition spree in recent years. Under his leadership, Cleveland-Cliffs made two big acquisitions the year the pandemic struck: In March 2020 it bought AK Steel, at the time the largest producer of iron ore pellets in North America, for $1.1 billion; followed by the December purchase of the U.S. assets of Luxembourgian manufacturing behemoth ArcelorMittal for $1.4 billion. Goncalves alluded to both transactions in his comments, citing Cleveland-Cliffs’ experience in “extracting meaningful synergies from previous acquisitions.” The firm added that it expects to create roughly $500 million in synergies if it were to acquire U.S. Steel.
They are all part of a larger push to vertically integrate Cleveland-Cliffs’ entire manufacturing process. In the 2020 deals, he acquired companies that had previously been customers and to whom the company sold raw materials needed to produce the pig iron used to make steel. Meanwhile, U.S. Steel invested heavily in a steel manufacturing process that relies heavily on scrap metal, something that Cleveland Cliff already produces in abundance. Making the deal even more appealing is the fact that the two companies have invested in different, but complementary green technologies.
Goncalves’s adversarial history with Wall Street
Aside from being a savvy M&A expert, Goncalves has also made a name for himself owing to his penchant for, at times, openly berating analysts. Perhaps humorously, he lit into Goldman Sachs’ basic materials and industrials analyst Matthew Korn on a 2018 earnings call. Goncalves, who had taken issue with Korn’s past assessments of Cleveland-Cliffs, criticized the analyst for skipping out on the call. “You can run, but you can’t hide,” Goncalves said. He went on to (jokingly?) threaten the analyst, saying he was eager to confront Korn at the Goldman Sachs conference “very soon” and advising him to bring backup in the form of a colleague on the commodities desk.
“It will be easier for you if you have the commodity desk guy with you interviewing me,” Goncalves said on the call in 2018. “If you are alone, it will be a lot worse. It will be bad no matter what, but it will be a lot worse if you’re alone.”
The two would in fact appear together at a Goldman-sponsored conference in November 2019, where they appeared to reconcile.
Earlier on the same 2018 call, Goncalves took big bank analysts in general to task over what he believed was their inability to understand Cleveland-Cliffs’ plans to pay off debt and fund efforts to reduce its climate impact, while still returning capital to shareholders.
“It’s unbelievable that these big banks still employ this type of people,” Goncalves said. “You guys should resign for your lack of knowledge of things, because it’s not like you don’t understand our business. You don’t understand your own business. You are a disaster. You are an embarrassment to your parents.”
In particular, he expressed disdain for short-sellers as “kids that play with computers and somebody else’s money,” saying he prefers instead to reward long-term holders of the stock.
“We are going to screw these guys so badly that I don’t believe that they will be able to only resign; they will have to commit suicide,” he said of the particular short-sellers that he accused of causing the company’s stock to fall.
Goncalves wasn’t done. “It will all be done to inflict maximum pain to these guys,” he continued on the same call. “I will wake up in the morning every day, looking at these guys, and I go to bed at night every day thinking about these guys. And that’s a bad place to be.”
Goncalves’s personal dislike for short-sellers goes back to his early days in the top job at Cleveland-Cliffs. On his first earnings call as CEO in August 2014, he refused to take Wells Fargo securities analyst Sam Dubinsky’s question because the analyst had downgraded the price target for Cleveland-Cliffs’ stock. “I’m not going to answer your question because you already know everything about my company,” Goncalves said with open sarcasm.
These shenanigans recall another CEO with an engineering background, a tendency to take big swings with M&A, and even a love of the letter “X.” Back in 2018, Tesla CEO Elon Musk exhibited similar disillusionment with Wall Street types during the question-and-answer portion of a first quarter earnings call. On that call, he repeatedly referred to questions as “boring” and even termed one “boneheaded.” Musk apologized for “being impolite” on Tesla’s following earnings call in August of that year. Musk also has a long history of frustration with short-sellers, referring to the practice as a way for “bad people on Wall Street to steal money from small investors,” during a trial earlier this year.
Cleveland-Cliffs did not respond to Fortune’s request for comment.
A labor-friendly CEO
An engineer by training, Goncalves graduated from the Military Institute of Engineering in Rio de Janeiro, before getting a master’s degree in metallurgical engineering from the Federal University of Minas Gerais in Belo Horizonte.
Goncalves steadily rose in the ranks of the steel manufacturing industry for years in Brazil, the U.S., and Europe—where he was a former board member of French steelmaker Ascometal. Prior to his current role, he was the chief executive, president, and chair of Metals USA. And before that he led another American industrial giant, California Steel Industries.
In October 2022, he steered Cleveland-Cliffs through one of the highest-profile tightropes a manufacturing CEO can face: negotiating a new union contract. The labor agreement that he reached with the United Steelworkers union guaranteed workers a 20% increase in base wages and included a pledge from the company to invest $4 billion in new facilities.
Goncalves has shown himself to be a particularly union-friendly executive, rarely expressing the outright hostility other C-suite types are known for when it comes to organized labor. In an interview with Fortune CEO Alan Murray in May 2022, Goncalves showed an eagerness to defy stereotypes of the out-of-touch, even callous executive. “Every single CEO you talk to will tell you they work for the shareholder,” he said. “I don’t. I work for my people.”
This could have relevance in his campaign to win over U.S. Steel, as U.S. Steel’s contract with the United Steelworkers has a clause that gives the union a decisive vote in any takeover bid, which it has said it will only exercise in favor of Cleveland-Cliffs’ offer. The union’s decision to do so leaves U.S. Steel with little room to maneuver. If it wants to avoid a takeover by Cleveland-Cliffs, then U.S. Steel would likely have to either find another buyer that made an offer appetizing enough for labor to renege on its promise, or convince shareholders that a 43% premium on their current shares wasn’t a deal worth taking, so they’d vote against any merger whatsoever.
Goncalves showcased the long-term thinking that has thus far characterized the M&A binge that’s become a hallmark of his strategy at Cleveland-Cliffs during an interview with CNBC on Monday. Without a merger, he argued that Cleveland-Cliffs, and in his view the U.S., wouldn’t be able to compete with the world’s biggest manufacturers, particularly from China. “I’m using the playbook,” he said.
The interview ended up being a perfect encapsulation of Goncalves, the executive and the person. He laid out a meticulous business case for a merger that would drastically improve results for Cleveland-Cliffs shareholders and workers; while repeatedly correcting CNBC reporter Leslie Picker about the proper pronunciation of his name, before ultimately taking no prisoners and calling her Lourdes as he signed off.
Judging by his ambitions for Cleveland-Cliffs and for the American steel industry, Lourenco Goncalves is acting like he wants the business books to remember his name.
