An asset management firm is aiming to block Nippon Steel’s acquisition of U.S. Steel and replace the current leadership at the American metal manufacturer after acquiring a minor stake in the company.
Ancora Holdings Group, which manages assets totaling $10 billion, disclosed that it has secured a 0.18% interest in the Pittsburgh-based company. The firm claimed on Monday that U.S. Steel’s CEO David Burritt and the board members have allegedly favored selling the company to Nippon, supposedly standing to gain over $100 million if the transaction materializes.
Recently, President Biden halted the nearly $15 billion takeover attempt, reaffirming his previous commitment to prevent the acquisition of the longstanding steel company known as Steeltown USA.
Nevertheless, the prospect of the deal is still alive, as the Biden administration extended the deadline to reverse the proposed acquisition, with both U.S. Steel and Nippon challenging the administration’s decision in a federal court action this month.
Ancora is now advocating for a new slate of independent directors and a fresh CEO dedicated to abandoning the Nippon agreement. In a letter made public on Monday, the firm announced the nomination of nine independent candidates for election during U.S. Steel’s upcoming annual shareholder meeting. Their proposal includes the appointment of Alan Kestenbaum, a former executive in the steel industry, as the new chief executive of U.S. Steel.
The firm emphasizes the need for board members who will prioritize the operational turnaround of U.S. Steel rather than pursuing a sale. Furthermore, Ancora is urging them to demand a $565 million breakup fee from Nippon if the deal does not proceed.
“U.S. Steel is in a critical situation due to its high capital expenditures, significant debt, sluggish earnings, and lack of a solid contingency plan,” Ancora stated.
The departure of the Biden administration does not significantly improve the likelihood of the Nippon acquisition being approved, considering that former President Trump has repeatedly expressed disapproval of the deal. He has raised concerns over why U.S. Steel would consider selling to a foreign entity amidst his proposed new tariff policies.
“Given President Trump’s strong business stance and his election by middle-class and working-class voters, we do not anticipate he will diverge from his ‘America First’ agenda or ignore the dissent from the United Steelworkers,” Ancora declared in its letter on Monday.
Conversely, U.S. Steel maintains its commitment to pursuing the Nippon deal, asserting it to be favorable for the U.S. steel sector, supply chains, and the workforce involved in steel production.
The company also reiterated allegations claiming that rival steelmaker Cleveland-Cliffs attempted to undermine its merger with Nippon, leading U.S. Steel to file a separate lawsuit against both the Ohio steelmaker and its CEO, Lourenco Goncalves, along with David McCall, the head of the U.S. Steelworkers union. The accusation includes claims of “coordinated anticompetitive and racketeering activities” intended to obstruct the deal.
“Ancora’s interests are not in line with the broader interests of all U.S. Steel shareholders,” the company remarked. “Handing control over to Ancora would not serve the best interests of our shareholders. We also harbor concerns regarding the motivations behind their nominations, particularly given the recent interactions between Ancora and Alan Kestenbaum regarding the failed Cleveland-Cliffs bid.”
It’s worth noting that Ancora also operates from Cleveland, as U.S. Steel had opted for Nippon’s offer over a bid from Cleveland-Cliffs earlier in 2023. This month, Goncalves expressed intentions to make another offer for U.S. Steel.
On Monday, shares of U.S. Steel Corp experienced a decline of over 1%.
