Activist investment firm Ancora Holdings Group LLC on Monday said it filed a proxy statement with the U.S. Securities and Exchange Commission to nominate nine candidates for election to U.S. Steel’s Board of Directors, while President Donald Trump the same day directed a U.S. national security panel to take another look at the proposed merger between U.S. Steel and Japan’s Nippon Steel Corp.
The president has directed the Committee on Foreign Investment in the United States (CFIUS) to conduct a review of Nippon Steel’s acquisition of U.S. Steel “to assist me in determining whether further action in this matter may be appropriate,” according to the president’s April 7 memo, which reinvigorated the proposed merger that former President Joe Biden blocked in January for concerns around national security.
Likewise, during his campaign, Trump also said he didn’t support the merger, although now he has ordered CFIUS to submit a recommendation to him within 45 days of the memo’s date “describing whether any measures proposed by the parties are sufficient to mitigate any national security risks identified by CFIUS.”
In response today, Ancora called for a delay of U.S. Steel’s annual meeting until after June 18 to allow for stockholders to learn the outcome of the new 45-day review by CFIUS of the company’s proposed merger with Nippon Steel.
“There is no legitimate reason for U.S. Steel to rush to hold its annual meeting before the governmental review concludes,” Ancora said in a statement released earlier today.
Meanwhile, Ancora’s proxy battle marks a significant escalation in its efforts to influence the future direction of one of America’s oldest and most iconic industrial firms, which it says would be a “win-win-win solution for stockholders, steelworkers, and the American economy.”
Cleveland, Ohio-based Ancora wants to replace U.S. Steel’s board and CEO with a slate it says includes executives with industry, financial, and operational experience who are equipped to guide the company through a pivotal period, according to an April 7 letter sent to fellow stockholders by Fredrick DiSanto, chairman and CEO of Ancora Holdings Group, and James Chadwick, president of Ancora Alternatives LLC.
“Our slate intends to oversee an improved balance sheet with liquidity and financial flexibility to support operational and strategic initiatives throughout all cycles,” DiSanto and Chadwick wrote. “Our nominees will also seek to keep the Company’s leverage low to maximize free cash flow generation.”
The slate’s plan includes installing Alan Kestenbaum, a legend in the steel industry who delivered total shareholder returns of more than 450% at Stelco Holdings Inc., as a replacement for U.S. Steel CEO David Burritt.
In the seven-page letter, Ancora also outlined a five-point plan that its slate would undertake to revitalize U.S. Steel’s performance and deliver value to shareholders.
Specifically, the plan would be to:
- Continue to pursue the $55 per share sale to Nippon Steel, though Ancora’s nominees would commit to ceasing all “vengeful and frivolous litigation,” including that taken against United Steelworkers President David McCall.
- Execute a strategy to achieve a target pro forma total return of $75.67 to stockholders if the U.S. Steel-Nippon Steel transaction remains blocked and is then formally terminated. This would include: selling the Big River Steel operation for estimated proceeds of $8 billion, netting $7.6 billion after taxes; returning $5 billion ($19.25 per share) to stockholders via a one-time special dividend; and using the remaining Big River sale proceeds to invest in the company’s North American Flat-Rolled assets, resulting in an estimated 120 percent increase in EBITDA by the end of 2027.
- Improve the company’s union relations in the pursuit of a new labor agreement ahead of the current deal’s expiration in 2026.
- Strengthen U.S. Steel’s balance sheet to ensure the company has the capital flexibility to pursue opportunities as they arise.
- Initiate a capital allocation plan that includes regular meaningful dividend payments and share buybacks.
“When we first invested in U.S. Steel, the company was facing an almost certain dead end because the $55 per share sale to Nippon faced bipartisan opposition from scores of local, state, and federal policymakers, including former President Joseph Biden and current President Donald Trump,” the executives wrote. “Today, however, the company’s securities filings and other public reports about increased capital investments indicate that the prospects for the transaction have significantly improved.”
Rather than stand in the way of a potential $55-per-share deal, Ancora said it wants to put U.S. Steel in the best possible position for either outcome: Securing a reversal of Biden’s executive order that blocked the $55-per-share sale and closing the transaction, or if the transaction is terminated, installing a better leadership team “with an executable plan to establish a tactically nimble, de-levered business with enormous value creation potential,” according to the letter.
Should the Nippon deal remain blocked by the federal government, the activist thinks that U.S. Steel will find itself in freefall with a CEO and board that have alienated union labor ahead of upcoming contract negotiations, deprioritized valuable plants across the Rust Belt, misallocated billions in stockholders’ capital, and presided over pronounced underperformance, the letter says.
“Although we hope the transaction goes through in light of our sizable stake in U.S. Steel, hope is no substitute for a viable contingency plan,” the Ancora execs wrote.
As of close of business Monday, U.S. Steel had not yet issued a response to Ancora’s announcement.
Ancora hopes to have its slate of board nominees elected at U.S. Steel’s May 6 annual stakeholders meeting.
“This year’s vote represents your only opportunity to install new leaders who possess the right experience and contingency strategy to restore U.S. Steel to greatness should the transaction collapse, as many policymakers and independent legal experts expect it to,” wrote the Ancora execs. “Because the company’s leadership never responded to our requests to delay the annual meeting until there is clarity on the transaction, you will not get a second chance to elect a new board if the deal falls apart and U.S. Steel remains a standalone entity.”