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Donald Trump’s re-election shows America is big on comebacks. And his 2020 electoral defeat suggests bitter losses can still lead to future success. US Steel CEO David Burritt is seeking a similar redemption arc.
Burritt engineered the $15bn sale of his company to Nippon Steel in 2023, only to see it blocked in the last weeks of Joe Biden’s presidency. Trump, for his part, never favoured selling the company to a foreign buyer. Nor did the United Steelworkers of America. But the buyout agreement has yet to be terminated and US Steel and Nippon are holding out hope that the newly inaugurated Trump can be persuaded to reverse Biden’s verdict.
While the US Steel boss fights the last battle, some investors have moved on to a new one. Earlier this week, hedge fund Ancora Holdings declared it wants fellow shareholders to replace the board and sack Burritt, whom it thinks can no longer effectively govern. It is not uncommon for a CEO to leave when a big transaction falls apart, but Burritt insists that his final chapter is not written.
Ancora may be harsh to fault Burritt for pursuing the deal with Nippon, as if an unprecedented brawl over a buyer from an allied nation was predictable. The Nippon share price offer, more than double where US Steel was previously trading, came amid a process kicked off by a hostile bid for US Steel from another rival, Cleveland Cliffs.
Moreover, it’s not like buyer and seller didn’t try to get the deal through. Nippon made generous, if uneconomic, concessions to allow local control of its prey. With Burritt at the helm, US Steel is pursuing two lawsuits, one over the Washington rejection and another over the union and Cleveland Cliffs’ attempts to scotch the deal. Besides, failure isn’t so bad. A Nippon abandonment would secure a $565mn termination fee for US Steel.
If the merger proves truly dead, the question of who should run the steelmaker is worth asking. Ancora says Burritt has failed as an operator and describes its candidate to replace him, industry executive Alan Kestenbaum, as a steel-sector “legend”. Such a person would come in handy: US Steel’s current share price is just $36, far below the $55 on offer from Nippon.
The biggest challenge for Burritt is that, unless he can revive the Nippon deal before its June drop-dead date, he must provide a persuasive vision of how US Steel can thrive on its own. Yet his brokering of the Nippon deal suggests he doesn’t think it can. It wouldn’t be surprising if shareholders are ready to give Ancora, which may have its own M&A angle, a hearing.
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