CLEVELAND — Ancora Holdings, a Mayfield Heights-based institutional asset management company and private wealth advisor, is calling on U.S. Steel to drop its merger agreement with Japanese-owned Nippon Steel, end its litigation against the federal government seeking to keep the deal alive and oust its Chief Executive.
In a letter sent to the U.S. Steel Board of Directors and shared with News 5, Ancora stated they are a growing shareholder in U.S. Steel and are calling for wholesale change, including nominating nine candidates for the U.S. Steel Board of Directors and the ouster of CEO David Burritt.
"Although we understand why the Board explored strategic alternatives in 2023, its ultimate decision to ignore national security and pursue a risky sale to Nippon – an overseas bidder that came in just $1 per share higher than a competing domestic bidder – 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," the letter states.
An activist investor that recently forced change at Norfolk-Southern, Ancora's letter states they have "a proven track record of correctly identifying companies that are held back by conflicted or unfit CEOs. Before we seek the removal of a CEO, we typically try to work with a board of directors to address and course correct the executive’s shortcomings. In this case, however, we see no future with Mr. Burritt."
Ancora wants to use its slate on the board to rebuild U.S. Steel, not sell it.
"Our slate includes individuals with corporate governance experience, finance expertise, industrials and manufacturing backgrounds, public policy acumen and other qualifications critical to turning around a standalone U.S. Steel."
"The slate’s plan includes installing Alan Kestenbaum, a steel industry legend who delivered total shareholder returns of more than 450% at Stelco Holdings Inc., as a replacement for Mr. Burritt. We expect the investment community will agree that any steel company would be fortunate to have Mr. Kestenbaum assume such a role."
Kestenbaum was executive chair at Canada's Stelco Holdings, acquired late last year by Cleveland-Cliffs.
Cleveland-Cliffs CEO Lourenco Goncalves started this whole process when he made an unsolicited bid for US Steel with the backing of the United Steelworkers Union.
It was a bid rejected by the US Steel board, but one that opened the door for other offers, which Japanese-owned Nippon stepped up with, and US Steel's Board of Directors accepted.
That brought immediate calls from Democrats and Republicans in Washington, including then Senators Sherrod Brown and JD Vance, for the Committee on Foreign Investment in the U.S. (CIFIUS) to block the deal for national security reasons.
That committee failed to rule either way, leaving the decision to President Joe Biden, who blocked it January 3.
Nippon and US Steel filed a federal lawsuit challenging that decision. They filed a separate suit against Goncalves, Cleveland-Cliffs and the United Steelworkers Union for what the suit claims were illegal and coordinated actions aimed at preventing the deal.
Cliffs can not make a formal bid unless or until Nippon abandoned its plans, a deadline the Biden administration extended over the weekend until June.
Cleveland-Cliffs CEO Lourenco Goncalves said this month that he wanted to make a new bid for U.S. Steel.
"I will relocate to Pittsburgh and US Steel will finally have a CEO residing in Pittsburgh," Goncalves said earlier this month during a nearly two-hour news conference in Western Pennsylvania.
Goncalves also said "the name of the surviving entity will be the United States Steel Corporation. Cliffs will be part of United States Steel Corporation. The mining side will be Cleveland Cliffs, the steel side will be United States Steel."
In response to Ancora's actions,, U.S. Steel issued a release on Monday stating that "U.S. Steel has an experienced and independent Board of Directors (the “Board”) with a proven track record of acting in the best interests of the Company and creating value for stockholders."
"We remain confident that our partnership with Nippon Steel is the best deal for American steel, American jobs, American communities and American supply chains. 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."
The U.S. Steel statement went on to say ,"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."
