US Steel stakeholder seeks to stop Nippon deal, change leadership

Yet another wrinkle has emerged in Nippon Steel Corp.'s proposed purchase of United States Steel Corp.

After former President Joe Biden blocked the $14.9 billion sale of Pittsburgh-based U.S. Steel to Japan-based Nippon on Jan. 3, the steelmakers filed two lawsuits claiming “ongoing illegal interference” with the transaction. Soon after, the Biden administration announced it would postpone enforcement of the order to June 18, giving the courts time to review the legal challenges.

Now, a U.S. Steel stakeholder is weighing in and seeking to shake up the company’s leadership.

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Ancora Holdings Group LLC, an investment firm based in Cleveland that claims to oversee approximately $10 billion in assets, has acquired a 0.18 percent stake in U.S. Steel and aims to stop the sale to Nippon and oust CEO David Burritt and the company’s board in favor of an independent slate of directors committed to walking away from the sale.

Ancora has nominated nine independent candidates for election to the steelmaker’s board at its 2025 annual meeting of shareholders, including Alan Kestenbaum, former CEO of Canadian steel company Stelco Holdings Inc., as a replacement for Burritt. Kestenbaum is the founder and current CEO of Bedrock Industries Group LLC, a privately funded holding company that owns and operates assets in the metals, mining and natural resources sectors.

Along with Kestenbaum, Ancora’s suggested board candidates include:

• Jamie Boychuk, who most recently served as executive vice president of operations at CSX Transportation from 2019-2023;
• Fredrick DiSanto, who currently serves as chairman and CEO at Ancora Holdings, the parent company of U.S. Steel shareholder Ancora Alternatives;
• Robert Fisher Jr., who currently serves as president and CEO of private investment company George F. Fisher Inc.;
• James Hayes, a member of the board of directors at Marine Electric Systems Inc., a privately held manufacturer of monitoring and control systems;
• Roger Newport, the former CEO of AK Steel Holding Corp. who serves on the boards of directors of American Financial Group Inc. and Alliant Energy Corp.;
• Shelley Simms, who currently serves as general counsel and chief compliance officer of Philadelphia-based Xponance Inc.;
• Peter Thomas, a board member at Berry Global; and
• David Urban, managing director of lobbying and public relations firm at BGR Group, a counselor at law firm Torridon Law PLLC and senior advisor to emergency response services provider Gothams LLC.

Ancora has invested in companies such as Berry Global Group Inc., Norfolk Southern Corp. and RB Global Inc., among others. In a letter addressed to U.S. Steel’s board of directors, the firm says that while it understands the steelmaker’s reasoning for exploring strategic alternatives in 2023, its “ultimate decision to ignore national security and pursue a risky sale to Nippon has led to a dead end.”

“There appears to be no legal basis and no precedent for U.S. Steel’s costly litigation over the presidential executive order blocking the transaction,” Ancora says, adding that recently inaugurated President Donald Trump also is a “vocal opponent” of the deal and a long-term proponent of strengthening the country’s domestic manufacturing base.

“We see no reason to believe that President Trump, a high-conviction businessman who was elected by middle-class and working-class voters, is going to contradict his self-described ‘America First’ agenda and disregard the opposition of the United Steelworkers.”

Ancora says the decision by the U.S. Steel board to “double down on its extremely poor decision” to pursue a sale to Nippon also has kept the company in a corroded state.

“Chief Executive Officer David Burritt, who stood to rake in more than $70 million himself if the sale had been consummated, has been allowed to misallocate capital, issue unreliable and overoptimistic forecasts and repeatedly miss financial targets,” Ancora says. “It seems the board failed to keep Mr. Burritt’s attention on efficiency, execution and risk management as steel prices remained depressed over the past year. Rather than finally acknowledge the company’s perilous trajectory and try to course correct, the board remains steadfastly committed to an underperforming leader who apparently lacks the ability and vision to bring U.S. Steel back from a busted transaction.”

Making its case

In its letter to the U.S. Steel board, Ancora says no transaction blocked by presidential executive order after a review by the Committee on Foreign Investment in the United States (CFIUS) has ever gone through, meaning there is no legal precedent for the litigation brought by U.S. Steel and Nippon.

“Although U.S. Steel seems to be holding out hope that it can convince President Trump to approve the deal, the facts indicate that this is a pipe dream,” the investor says, noting that Trump previously has voiced opposition to the transaction. “Nothing he has said since former President Joseph Biden’s executive order indicates a change of heart.

“In addition to the aforementioned headwinds, the blocked deal also faced opposition from Vice President J.D. Vance, Secretary of State Marco Rubio, a bipartisan contingent of high-profile lawmakers and the United Steelworkers. … It should now be clear as day that U.S. Steel is now fighting a binding executive order, the Trump administration, an array of senators and representatives and a multitude of third parties that do not buy into Mr. Burritt’s self-serving arguments.”

Additionally, Ancora claims that even before the sale to Nippon was announced in December 2023, Burritt may have “diverted his focus” from U.S. Steel’s operations. The investment firm cites cost overruns at the company’s Big River Steel facility in Arkansas, as well as missed earnings estimates over the past year-and-a-half, as examples of mismanagement.

“U.S. Steel is now in a dire state due to its excessive capital spending, high debt, soft earning and nonexistent contingency plan,” Ancora says. “While Mr. Burritt may not care due to what seem to be his jet-setting ways, we believe the city of Pittsburgh and Commonwealth of Pennsylvania have been put at economic risk by his sale aspirations and mismanagement of the company. 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.”

Going forward

Ancora says its board and CEO nominations will help set a “viable go-forward strategy” if elected.

If elected, the company says its slate and Kestenbaum are committed to:

• pursuing the $565 million breakup fee that Ancora says is needed by U.S. Steel based on “Mr. Burritt’s own statements regarding the prospect of potential facility closures and layoffs;”
• immediately ending the current board’s “spending spree” on Wall Street advisors, which the firm estimates to be a nine-figure sum over the past 18 months;
• revamping the executive leadership team to be full of operators residing near facilities and plants;
• restoring relations with labor union members and leaders, community organizations and elected officials;
• releasing a clear standalone strategy so investors have transparency about priorities for capital allocation, operations and production, and other commercial initiatives;
• protecting Mon Valley Works and other facilities Ancora says Burritt has threatened to close; and
• not soliciting acquisition proposals from Cleveland-Cliffs Inc. or any other domestic or foreign partner.

Ancora says it has a straightforward goal to “make U.S. Steel great again for the benefit of employees, customers, shareholders and all other stakeholders who want a bright future for this American icon. Only under a new board and management team do we believe this is possible.”

U.S. Steel response

In a response to Ancora’s letter, U.S. Steel says it has an experienced and independent board of directors with a proven track record of acting in the best interests of the company and creating value for stockholders, evidenced by its efforts over the past year to complete the transaction with Nippon and deliver $55 per share for shareholders. The company says its board has taken every action to deliver value, including running a “robust strategic alternatives process,” which it notes resulted in a 142 percent premium to the unaffected closing price of $22.72 on Aug. 11, 2023.

“We remain confident that our partnership with Nippon Steel is the best deal for American steel, American jobs, American communities and American supply chains,” the company says. “With Nippon Steel, U.S. Steel remains an American company, and its headquarters will stay in Pittsburgh, its iconic name will not change, and its products will remain mined, melted and made in America.

“U.S. Steel’s partnership with Nippon Steel is the only path that enables the necessary know-how, technology and investments to secure the future of U.S. Steel—including no less than $1 billion to Mon Valley Works and approximately $300 million to Gary Works as part of the $2.7 billion committed to invest in BLA-covered facilities. The transaction has received overwhelming support from our stockholders, communities and employees—including local union leadership.”

Additionally, U.S. Steel says Ancora’s interests are not aligned with all of the company’s stockholders.

“Our stockholders will not be well served by turning over control of the company to Ancora,” the steelmaker says. “We are also concerned about the motivations behind these nominations, given Ancora’s and Alan Kestenbaum’s recent dealings with failed bidder Cleveland-Cliffs.”

Kestenbaum was Stelco’s CEO from July 2017 to February 2019, and returned to the position in February 2020 until the company was acquired by Cliffs last December.

U.S. Steel notes the 2025 annual shareholder meeting has not yet been scheduled and no stockholder action is required at this time.