- Cleveland-Cliffs (NYSE:CLF) has signed a deal to acquire Canadian peer Stelco Holdings (TSX:STLC) for C$3.4 billion
- Cliffs offered C$60.00 in cash and 0.454 shares of its common stock for each Stelco share held, or a total of C$70.00
- Upon completion of the transaction, Cliffs’ shareholders will own 95 per cent of the company while shareholders of Stelco, which is expected to continue operations as a wholly owned unit, will own 5 per cent of the combined company
- Cleveland-Cliffs Inc. last traded at C$22.06 per share and Stelco Holdings Inc. last traded at C$37.36 per share
Cleveland-Cliffs (NYSE:CLF) has signed a deal to acquire Canadian peer Stelco Holdings (TSX:STLC) for C$3.4 billion.
Under the agreement, Cliffs offered C$60.00 in cash and 0.454 shares of its common stock for each Stelco share held, or a total of C$70.00.
The Cleveland, Ohio-based company expects the buyout will be immediately accretive to its 2024 and 2025 per-share profit.
Stelco operates in two sites in Ontario, one a steelmaking facility in Lake Erie Works and the other a downstream finishing and cokemaking facility in Hamilton Works.
Stelco’s headquarters will remain in Hamilton and the name and legacy of Stelco will be preserved in Hamilton and Nanticoke, Ontario.
Upon completion of the transaction, Cliffs’ shareholders will own 95 per cent of the company while shareholders of Stelco, which is expected to continue operations as a wholly owned unit, will own 5 per cent of the combined company.
Stelco will continue its significant operations in Hamilton and Nanticoke, make capital investments of at least C$60 million over the next three years, and plans to increase steel production over current levels from those facilities.
The U.S. steelmaker said this acquisition expands its steelmaking footprint and doubles its exposure to the flat-rolled spot market, with cost advantages in raw materials, energy, healthcare and currency.
“I want to first recognize Alan Kestenbaum and the Stelco team for the remarkable turnaround they executed at Stelco, turning what was an underperforming asset under previous ownership into a very cost-efficient and profit-oriented company,” Cliffs’ chairman of the board, president and CEO, Lourenco Goncalves, said in a news release. “In the process, they restored the Canadian national pride associated with Stelco, and we are going to continue that. We did this deal the way it should be done, reaching a respectful agreement between the two parties that keeps national interests at the forefront and recognizes the importance of the workforce.
“The enterprise value of this transaction is significantly lower than the cost of building an equivalent replacement mill in the United States, and the cost structure is lower than what a new U.S. mill would provide us. Stelco is a company that respects the union, treats their employees well, and leans into their cost advantages. With that, they are a perfect fit for Cleveland-Cliffs and our culture. We look forward to proving that our ownership of Stelco will be a net benefit for Canada, the province of Ontario, and the cities of Nanticoke and Hamilton.”
This move comes after Cleveland Cliffs’ failed bid for rival United States Steel Corp. (NYSE:X) in August 2023 and marks its first acquisition since then.
Cleveland-Cliffs is the largest flat-rolled steel producer in North America and the largest manufacturer of iron ore pellets in North America. The company is vertically integrated from mined raw materials, direct reduced iron, and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling and tubing.
Stelco is a low cost, integrated and independent steelmaker with one of the newest and most technologically advanced integrated steelmaking facilities in North America. Stelco produces flat-rolled value-added steels, including premium-quality coated, cold-rolled and hot-rolled steel products, as well as pig iron and metallurgical coke.
Cleveland-Cliffs Inc. (NYSE:CLF) last traded at C$22.06 per share and Stelco Holdings Inc. (TSX:STLC) last traded at C$37.36 per share.
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(Top photo of rolled steel: Cleveland-Cliffs)