Shares in U.S. Steel (X) were stronger today after activist investor Ancora Holdings said it had changed its mind and now backed the planned $14.9 billion merger with Japan’s Nippon Steel.
Ancora’s New Approach
Ancora, which had previously attempted to undermine the deal and is seeking to replace U.S. Steel’s board and chief executive David Burritt, has now said that it had no intention of standing in its way.
If the Nippon deal does fall through, however, Ancora said that it had another turnaround plan in place which would include U.S. Steel exploring a sale of its non-union Big River assets, which it estimates could be worth $8 billion to $9 billion. It would use proceeds from that sale and potentially others to fund a special dividend of approximately $19.25 and help fund a new $3.2 billion blast-furnace facility in Indiana.
In addition, it has called for U.S. Steel to use existing cash reserves to revitalize plants in Pennsylvania, Ohio, and Illinois.
U.S. Steel Criticism
U.S. Steel blasted Ancora for its “flip-flopping” approach and said that its “last-minute plan” was inconsistent between now backing the Nippon deal but also presenting a new investment plan.
The move comes after U.S. President Donald Trump directed the Committee on Foreign Investment to conduct and finalize a new review of the transaction within 45 days.
Nippon Steel wants to invest $7 billion to upgrade U.S. Steel’s factories, but Trump hasn’t been too keen on the merger proposal. He has previously said he preferred a strategic investment or minority stake instead.
Is X a Good Stock to Buy?
On TipRanks, X has a Moderate Buy consensus based on 2 Buy and 4 Hold ratings. Its highest price target is $45. X stock’s consensus price target is $42.60 implying an 3.29% downside.
