On July 15, 2024,steelmanufacturer Cleveland-Cliffs announced its plans to buy Canadian steelmaker, Stelco Holdings, for $2.8 billion (C$3.85 billion). This is thefirst major transactionfor Cliffs since a failed bid to buy U.S. Steel in 2023.
Cleveland-Cliffs Buy Stelco
Cleveland-Cliffs, based in Cleveland, OH, expects the Stelco Holdings acquisition to boost its profits as early as 2024 and 2025. The company’s CEO, Lourenco Goncalves, believes the new deal is a great move as it’s cheaper than starting a new steel mill from scratch in the U.S.
The international president of the United Steelworkers union, David McCall, is also supportive of the deal which is set to wrap up in the last quarter of the year.
Cliffs/Stelco Shares
Cliffs is offering C$60 in cash plus a bit of its own stock (0.454 shares to be exact) for each Stelco share, which adds up to C$70 per share—not bad considering Stelco’s shares closed at C$37.36 on the last trading day before the acquisition announcement.
Once the deal goes through, Cliffs’ shareholders will own a hefty 95% of the combined company, with Stelco’s shareholders holding onto 5%. Despite all the commotion, Cleveland-Cliffs’ shares took a little dip, down 3% in premarket trading.
Failed U.S. Steel Bid
In August of last year, Cleveland-Cliffs—the largest flat-rolled steel producer in North America—tried to buy U.S. Steel with an unsolicited offer of $7.3 billion which was swiftly rejected.
U.S. Steel thought the offer was a bit on the low side (in fact, theycalled it“unreasonable”) and went fora mergerwith Japan’s Nippon Steel instead, in a whopping $14.9 billion deal.
Cleveland-Cliffs/Stelco Merger—Summary
By buying Stelco, Cliffs will be doubling its already huge presence in the flat-rolled steel market, and saving on raw materials, energy, and healthcare costs.
Plus, it’s adding two of Stelco’s Ontario sites to its portfolio: a steelmaking facility at Lake Erie Works and a downstream finishing and cokemaking plant at Hamilton Works.
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