Investor Seeks to Quash US Steel-Nippon Deal After Taking Stake in US Steelmaker
An asset manager is attempting to halt Nippon Steel’s proposed takeover of U.S. Steel and replace the leadership of the American steelmaker after acquiring a stake in the company.
Ancora, the asset manager in question, has reported acquiring a 0.18% stake in the Pittsburgh-based company. They allege that U.S. Steel’s board and its CEO, David Burritt, have given preference to the sale to Nippon because they stand to gain over $100 million if it proceeds.
Recently, Nippon Steel and U.S. Steel challenged a U.S. government decision to block Nippon’s proposed $15 billion acquisition, citing national security concerns via a federal lawsuit.
Ancora is advocating for a new independent slate of directors at U.S. Steel and the appointment of a new CEO committed to abandoning the Nippon deal. In an open letter, the firm announced it has nominated nine independent directors for election at U.S. Steel’s annual shareholders meeting this year. Their plan includes appointing Alan Kestenbaum, the former Chairman and CEO of Stelco, as the new CEO of U.S. Steel.
The asset manager seeks new board members dedicated to focusing on U.S. Steel’s turnaround efforts, rather than pursuing alternative bidders or selling the company. Ancora also wants to pursue the $565 million breakup fee associated with the deal.
“U.S. Steel is now in a dire state due to its excessive capital spending, high debt, soft earnings, and lack of a contingency plan,” Ancora stated in their communication.
They emphasized that “There are consequences associated with having out-of-touch leadership with weak involvement in local communities. Absent a miracle, Ancora believes a substantial and urgent reconstitution of the company’s leadership is necessary.”
In response, U.S. Steel, headquartered in Pittsburgh, reaffirmed its commitment to pursuing a deal with Nippon, stating it believes the deal is in the best interests of the U.S. steel industry, supply chains, and job market.
U.S. Steel expressed reservations about Ancora’s plans, citing, “Ancora’s interests are not aligned with all U. S. Steel stockholders. Our stockholders will not be well served by turning over control of the company to Ancora. We are also concerned about the motivations behind these nominations, given Ancora’s and Alan Kestenbaum’s recent dealings with failed bidder Cleveland-Cliffs.”
It is noteworthy that U.S. Steel rejected a bid from their competitor, Cleveland-Cliffs, opting instead for Nippon’s offer in 2023. Cleveland-Cliffs’ CEO, Lourenco Goncalves, expressed interest in making a new bid for U.S. Steel earlier this month.
Interestingly, Ancora is also based in Cleveland.
