Cleveland-Cliffs has agreed to purchase Canadian steel producer Stelco Holdings for approximately $2.5 billion, expanding its steelmaking operations and doubling its exposure to the flat-rolled steel market. Stelco shareholders will receive 60 Canadian dollars ($44) in cash and 0.454 shares of Cliffs for each Stelco share, totaling C$70 per share.
The acquisition is expected to yield about $120 million in annual cost savings and boost Cliffs’ earnings per share in 2024 and 2025. Stelco, which operates two facilities in Ontario—Lake Erie Works and Hamilton Works—produces 2.6 million net tons of flat-rolled steel annually. It will continue to operate as a wholly-owned subsidiary, maintain its Hamilton headquarters, and invest at least C$60 million over the next three years.
Upon completion of the deal, Cliffs shareholders will own 95% of the combined company, with Stelco shareholders holding the remaining 5%. The transaction has received support from major Stelco shareholders, including Fairfax Financial Holdings and Stelco’s Executive Chairman Alan Kestenbaum, as well as backing from the United Steelworkers union.
Cleveland-Cliffs CEO Lourenco Goncalves highlighted the cost advantages of the acquisition compared to building a new mill in the U.S. This deal follows Cliffs’ unsuccessful $7.3 billion bid for U.S. Steel in August 2023, which opted to merge with Nippon Steel instead.
The acquisition, set to close in the fourth quarter, aims to strengthen Cliffs’ position in the steel industry while leveraging cost advantages in raw materials, energy, healthcare, and currency. Shares of Cleveland-Cliffs were down 3% in premarket trading following the announcement.
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