Cleveland-Cliffs to buy Canadian steelmaker Stelco for $2.8 billion
(Reuters) -Cleveland-Cliffs said on Monday it will buy Canadian peer Stelco Holdings for C$3.85 billion ($2.8 billion), marking its first acquisition since a failed bid for rival U.S. Steel last year.
Cliffs’ CEO Lourenco Goncalves said the steel maker stands to benefit from the deal as the enterprise value has a lower cost structure compared to building a new mill in the U.S.
The Cleveland, Ohio-based company expects the buyout to be immediately accretive to its 2024 and 2025 per-share profit.
Cliffs has 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. Stelco’s shares last closed at C$37.36.
The transaction, the first for Cliffs since it bid for U.S. Steel in August, has received support from David McCall, international president of the United Steelworkers (USW) union and is expected to close in the fourth quarter.
Cleveland-Cliffs had made an unsolicited $7.3 billion offer for the takeover of rival U.S. Steel in August 2023.
However, U.S. Steel called the bid “unreasonable” and instead decided to merge with Japanese steel giant Nippon Steel for $14.9 billion.
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.
Upon completion of the transaction, Cliffs’ shareholders will own 95% of the company while shareholders of Stelco, which is expected to continue operations as a wholly owned unit, will own 5% of the combined company.
The acquisition of Stelco expands Cliffs steelmaking footprint and doubles its exposure to the flat-rolled spot market, with cost advantages in raw materials, energy, healthcare and currency, the U.S. steelmaker said. [IRONORE/]
Shares of Cleveland-Cliffs were down 3% in premarket trading.
($1 = 1.3641 Canadian dollars)
(Reporting by Nathan Gomes, Aatreyee Dasgupta and Shivansh Tiwary in Bengaluru; Editing by Krishna Chandra Eluri and Sriraj Kalluvila)
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