Al Root

An activist investor is trying to scuttle a deal between United States Steel and Nippon Steel that was already on life support.

The battle over the American manufacturing icon just got a little stranger than it already was.

Ancora Catalyst Institutional LP took a small stake in U.S. Steel, and is seeking nine of the company's 12 board seats.

Nominating directors -- and having them elected -- is one way for a fund to gain control of a company, allowing them to change management and set a strategic direction.

Ancora didn't immediately respond to a request for comment.

"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," said U.S. Steel in an emailed statement. "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 recently ran Stelco which was acquired by Cleveland-Cliffs.

Cliffs tried to merge with U.S. Steel but was beaten out in a bidding war by Japan's Nippon Steel, which agreed to pay $55 a share in cash for the company.

Cliffs and United Steel Workers union leadership lobbied against the deal, which was met with political opposition on both sides of the aisle. Former President Joe Biden blocked the Nippon-U.S. Steel merger on the grounds of National Security, despite concessions from Nippon about the running of the company and promises to invest billions of dollars in the American steel maker.

Nippon is the fourth-largest steel maker in the world. U.S. Steel ranks in the mid-20s. Nippon's money represents billions of dollars that U.S. Steel doesn't have.

U.S. Steel management has said failing to complete the merger could result in plant closures and layoffs. It's suing to try to overturn Biden's decision. President Donald Trump has said he would protect the domestic steel industry with tariffs. Cleveland-Cliffs management hasn't explicitly committed to bidding again for U.S. Steel but strongly hinted at that possibility.

It's a complicated situation.

U.S. Steel stock was down 1.5% in premarket trading at $36.84. Shares have been far below Nippon's offering price for months.

It's tough to say what impact Ancora's bid to change U.S. Steel's strategic direction is having. The market was deeply in the red early Monday.

S&P 500 and Dow Jones Industrial Average futures were down 2.3% and 0.9%, respectively. Futures on the technology-heavy Nasdaq Composite were down 4.2% with Nvidia stock falling about 12%. Microsoft and Alphabet shares were down about 6% and 4%, respectively.

The drops aren't related to steel. It's about artificial intelligence.

Chinese AI app DeepSeek topped Apple's app chart over the weekend. It seems to perform as well as other AI apps such as OpenAI's ChatGPT, but appears to have been developed at a fraction of the cost.

That's creating anxiety for investors, which is a problem for all stocks. AI optimism helped fuel the 2024 stock market rally. Coming into Monday's trading, Nvidia shares were up almost 130% over the past 12 months.

Write to Al Root at allen.root@dowjones.com

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January 27, 2025 07:44 ET (12:44 GMT)

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