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Ancora uses books and records request to gain information

for

proxy battle

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Wants U.S. Steel to drop lawsuit to rescue merger with

Nippon

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Request comes after Trump said Nippon's bid would be an

investment not a purchase

By Svea Herbst-Bayliss

NEW YORK, Feb 19(Reuters) - Activist investor Ancora

Holdings is demanding access to records from U.S. Steel,

ranging from board minutes to financial documents, as it

ratchets up a campaign to replace some of the company's board

members and chief executive, according to a letter seen by

Reuters.

Ancora last month launched a boardroom challenge at U.S. Steel

as the iconic American company is fighting in court to salvage a

planned merger with Japan's Nippon Steel ( NISTF ). The company

is asking the U.S. Court of Appeals to set aside former U.S.

President Joe Biden's order that blocked the deal citing

national security concerns. U.S. Steel has said it would need to

make layoffs and close plants if the deal were scuttled.

Ancora's decision to make a so-called books and records

request shows how the activist is using one of the legal tools

available to try and win a potentially bitter board room battle.

In its letter - sent to Megan Bombick, U.S. Steel Associate

General Counsel, Securities & Corporate Secretary - Ancora told

U.S. Steel it wants to investigate "potential wrongdoing in

connection with ... the company's futile (lawsuit) ... and "the

unusual trading plan of the company's CEO (David Burritt)."

According to the letter, Ancora is looking for information

to determine whether the board violated its fiduciary duties by

filing the lawsuit and to determine whether Burritt "sought to

trade on material nonpublic information."

U.S. Steel called Ancora's request a "distraction that repeats

its baseless claims." The company's board "has been and remains

unwavering in its commitment to acting in the best interests of

all stakeholders, including our stockholders," a representative

said, adding U.S. Steel will review the request "and respond in

accordance with applicable laws and regulations."

The investor currently owns roughly 500,000 shares, or less

than 1%, in U.S. Steel but has said it plans to increase its

position significantly. The company, which was once the world's

biggest steel producer, has a market value of $8.7 billion.

Ancora plans to hold an investor call to discuss its campaign at

10 a.m. on Wednesday.

Last month, Ancora nominated nine director candidates to

U.S. Steel's 12-person board, including an executive who could

replace the CEO. The activist also wants the company to drop the

lawsuit where it is asking a federal appeals court to overturn

Biden's decision to scuttle the $14.9 billion deal.

By pursuing the lawsuit, U.S. Steel is hurting shareholders,

Ancora argued in the letter, noting it wants management and the

board to concentrate on fixing the business.

"In continuing to litigate the Petition for Review, the

Board wastes money and resources in the desperate hope that

(the) Merger will land them significant personal benefits," the

letter said.

Ancora has given the company until February 24 to provide it

with typically confidential documents related to the proposed

merger with Nippon and Burritt's trading plan, according to the

letter.

It wants to investigate whether directors and officers of

the company "breached their fiduciary duties to the company and

its stockholders" and find out more about Burritt's trading in

U.S. Steel stock "in relation to merger discussions" and how he

used his predetermined 10b5-1 plan that allows insiders to sell

stock.

Earlier this month, U.S. President Donald Trump said Nippon's

bid would take the form of an investment instead of a purchase.

A Japanese government spokesperson earlier this month said

Nippon is considering proposing a bold change in plan from its

previous approach of seeking to buy U.S. Steel and Prime

Minister Shigeru Ishiba called the decision to block the deal

"unjust political interference."

Ancora has already identified Alan Kestenbaum, the former

CEO of Canadian steel company Stelco, as a suitable replacement

for Burritt. Stelco was purchased by steel manufacturer

Cleveland-Cliffs last year.

The company has not yet set an annual meeting date and last

year's was held on April 30.

Ancora has taken on a number of big companies and won board

seats. Earlier this month, auto-parts company LKQ handed

two board seats to the investor and a year ago Norfolk Southern ( NSC )

shareholders elected three Ancora nominated directors to

the railroad's board. Late last year, Norfolk Southern ( NSC ) pledged

to work with Ancora to add a new director to avoid another fight

with the firm.

(Reporting by Svea Herbst-Bayliss; Editing by Aurora Ellis and

Chizu Nomiyama )