A Needless Proxy Fight Is Ruining a Historic Deal for an American Manufacturer

By Anna Alimani

In a January 27 open letter, Ancora Holdings announced an intended proxy fight against U.S. Steel’s current Board of Directors in regards to the company’s acquisition by Nippon Steel. In its announcement, Ancora, under its new proposed CEO and board, said it will not “solicit acquisition proposal from…any other partner (domestic or foreign).”

However, the odd timing of the announcement and the vague promise not to sell the company raises questions about the seriousness of the effort, as well as its unintended consequences.

U.S. Steel has made it clear that it needs the additional resources that result from a merger to continue its operations that have been slowing in the past years. With Ancora’s longtime ties to failed bidder Cleveland-Cliffs, all signs point to this proxy fight being a path of destruction for U.S. Steel if it does not stop.

One way or the other, U.S. Steel needs an injection of funds to continue operations. The most realistic way to achieve that is Nippon Steel’s proposed acquisition.

• Without Nippon Steel’s proposed investments, U.S. Steel will be putting thousands of good-paying jobs at risk. U.S. Steel CEO David Burritt has made clear that there will be "unavoidable consequences if the deal fails." Such consequences include “pivoting away” from its blast furnace facilities that support thousands of jobs, as well as moving its headquarters out of Pennsylvania, which risks another 11,000 jobs.
• Steelworkers in Pennsylvania have been at the forefront of supporting the Nippon Steel-U.S. Steel deal. Scott Buckiso, senior vice president and chief manufacturing officer of U.S. Steel, said, "The transaction with Nippon Steel will ensure the legacy of U.S. Steel will continue and continue to thrive for generations to come."
• When the Biden administration rejected the deal, U.S. Steel lamented that “blocking this transaction means denying billions of committed investments to extend the life of U. S. Steel’s aging facilities and putting thousands of good-paying, family-sustaining union jobs at risk.”
• Locally elected officials, contrary to politicians in Washington, support the deal as well.   According to Clairton Mayor Richard Lattanzi, if the deal doesn’t get done, “Mon Valley is dead.” 

This specific proxy fight launched by Ancora does not have the best interests of U.S. Steel, its shareholders, and its employees in mind.

• Ancora Holdings is an activist hedge fund based in Cleveland, OH, with an infamous reputation for being “one of the most feared activist hedge funds” that unlock optimum value of its assets.
• However, in this proxy fight against the current board of U.S. Steel, it defies its own reputation of pragmatism and efficiency.
• With only a reported 0.18% stake in the steelmaker, Ancora’s declaration of war is unrealistic to bring the changes it proposed – like removing the current U.S. Steel CEO and installing multiple new board members.
• Ancora’s criticism of U.S. Steel’s continued pursuit of its merger with Nippon Steel also goes against its own purpose in investing in USS – maximizing its profits in shares.
• Ancora mischaracterized the valuations of Nippon’s proposal entirely. They are claiming that the deal is just $1 more per share than Cleveland-Cliffs' offer, which is not true at all. Nippon Steel's deal price is $55 a share, while Cleveland-Cliffs is $35.
• With Nippon Steel’s proposal to buy the Pittsburgh company for $14 billion, plus $2.7 billion worth of guaranteed investments into its facilities, there is no better option to maximize shareholder value.
• This is exactly why in April 2024, more than 98% of the shares voted by stockholders approved this unprecedented transaction.

Ancora’s ties to failed bidder Cleveland-Cliffs are clear and reflective of the true motives of its unwelcome shareholder activism.

• Cleveland-Cliffs and its notorious CEO Lourenco Goncalves have been trying to acquire U.S. Steel for more than a year, since August 2023.
• After losing out to Nippon Steel in a bidding contest at the end of 2023, the Ohio-based company launched a bitter campaign of illegal racketeering and anticompetitive activities to try to ruin the deal with Nippon Steel.
• When the Biden administration blocked the deal in January, Cliffs – as if it had been waiting for this opportunity – swooped in and made a new bid for U.S. Steel, even after shareholders of USS made it clear they preferred to be bought out by the Japanese firm.
• Given this context, one must wonder whether Ancora’s unexpected proxy fight is ultimately being orchestrated by Cleveland-Cliffs, to which it has close ties.
• When Ancora launched another proxy fight in 2024 within the railroad company Norfolk Southern, Cleveland-Cliffs publicly backed the hedge fund’s efforts.

In this U.S. Steel proxy fight, its proposed directors on the board include multiple individuals with direct and indirect ties to Cleveland-Cliffs:

• Robert P. Fisher, Jr. used to serve on the board of directors of Cleveland-Cliffs under May 2024.
• Roger K. Newport served as the CEO of AK Steel, another steelmaking company that Cliffs bought in 2020. He also served as the Chairman of the American Iron and Steel Institute, before Cliffs CEO Goncalves succeeded him.
• Alan Kestenbaum, the proposed new CEO for U.S. Steel by Ancora, most recently served as the CEO of Stelco – a Canadian steelmaker that Cliffs acquired in 2024.

Alan Kestenbaum, the proposed new CEO for U.S. Steel by Ancor, has a career that has been laced in controversy from the start. Kestenbaum started his career working for Marc Rich, a commodities trader charged with tax evasion and trading with Iran during the hostage crisis of the late ‘70s. Today, Kestenbaum prioritizes a far-left social agenda over getting things done/what is best for business. In 2020, his company Stelco implemented the BlackNorth Initiative, which enforced DEI hiring in Canada, a practice that has become unpopular across North America. 

Kestenbaum also a history of moving employees overseas to China. At a 2010 Steel Summit in New York, he said, “we wanted to capture that profit margin. So we bought a facility in China, and have moved several people over there.”

Additionally, Kestenbaum’s business dealings in China pose a national security threat. At that same summit, he said he wants to focus more on business within China and expanding their facilities. Later in a 2015 conference call, Kestenbaum spoke about his desire to invest in Chinese “solar, silicon and automotive.”  Someone perusing deals on critical infrastructure with America’s top competitor/adversary does not have the values needed to be CEO of U.S. Steel. 

Ancora Holdings is attempting to create chaos for U.S. Steel, as opposed to truly helping the company. They are using Biden's block of the Nippon deal as an opportune time to pull the wool over the public’s eye and profiteer at the expense of what is best for U.S. Steel, shareholders, and employees.

Anna Alimani is an economic and corporate analyst, holding a Bachelor’s degree in Business Administration from Purdue University and an Executive MBA from Columbia Business School, specializing in Private Equity. 

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