Al Root

Activist investor Ancora has decided that $55 a share for U.S. Steel stock might not be too bad after all.

The company sent a letter to its fellow U.S. Steel shareholders outlining a new plan for the steel maker, saying it is still seeking control with a new slate of directors. But that board, if elected, would seek to complete the sale of the company to Nippon Steel for $55 a share.

It is the latest development in a long and complex drama for the company. In August 2023, U.S. Steel began looking for strategic alternatives after rejecting a roughly $35 cash and stock bid from Cleveland-Cliffs. Nippon Steel and U.S. Steel agreed to the $55 per share takeover in December 2023.

That deal, however, was vehemently opposed by lawmakers on both sides of the aisle, opening the door for other bids. Ancora ramped up its activity after President Joe Biden blocked the Nippon deal on national security grounds. U.S. Steel and Nippon are suing to overturn that decision.

Earlier in the process, Ancora appeared dead set against the Nippon deal. "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," wrote the fund in an earlier statement. Ancora sought to replace U.S. Steel CEO David Burrit with former Stelco CEO Alan Kesenbaum to "make U.S. Steel great again in the public market."

The economic outlook is cloudier now, though, as President Donald Trump's tariffs have sent U.S. stock markets tumbling. That might be a factor in the reversal. Ancora didn't immediately respond to a request for comment.

If the $55 per share deal doesn't go through, Ancora wants to sell Big River Steel, which U.S. Steel owns, for $8 billion. It wants to return $5 billion, or almost $20 a share, to investors as a special dividend. It would use the remaining $3 billion to invest in existing facilities to boost earnings by "120%."

Big River Steel, located in Arkansas, is a minimill, meaning it remelts scrap and other metallics to make steel. It is called "mini" because it doesn't require the capital investment and size required to make steel using iron ore, blast furnaces, and basic oxygen furnaces. Nucor pioneered low-cost minimill technology in America.

How much Big River Steel would sell for isn't certain. U.S. Steel, overall, is worth about $12 billion. The minimill is only one of its steelmaking assets.

With the mill sold, dividend paid, and assets renewed, Ancora says, the value realized for shareholders would be north of $75 a share. That, of course, is only Ancora's projection.

Ancora's target values U.S. Steel at about 10 times estimated 2026 earnings before interest, taxes, depreciation, and amortization, or Ebitda. Nucor, the largest steel maker in the U.S., trades for closer to five times estimated 2026 Ebitda.

U.S. Steel stock was down 3% in early trading at $37.14 a share, which isn't all that bad. The S&P 500 and Dow Jones Industrial Average were down 3.6% and 3.3%, respectively. Nucor stock was off 5%.

President Donald Trump's tariffs continue to roil the stock market.

Tariffs have boosted domestic steel prices, benefiting steel makers. The benchmark price is above $900 per ton, up from about $700 at the end of 2024.

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

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 07, 2025 10:16 ET (14:16 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.