Cleveland-Cliffs to buy Stelco in $2.5B deal

Per the agreement, shareholders of Stelco stock will receive CA$60 per Stelco common share in cash. They will also receive 0.454 shares of Cliffs common stock per share of their Stelco stock. The companies said this represents a total consideration of CA$70 per Stelco share.

Stelco will operate as a wholly owned subsidiary of Cliffs, maintaining the company’s name, Hamilton headquarters, and legacy.

The purchase includes Stelco’s operations in Ontario: the integrated steelmaking Lake Erie Works and the downstream and cokemaking Hamilton Works.

Stelco has agreed to make at least CA$60 million in capital investments over the next three years and plans to raise production from current levels. Each year, it ships approximately 2.6 million short tons of flat-rolled steel, primarily hot-rolled that goes to service centers.

The company has already been working to incrementally increase the utilization of its unused downstream value-added capacity at Hamilton Works.

“The acquisition of Stelco expands Cliffs’ steelmaking footprint and doubles Cliffs’ exposure to the flat-rolled spot market, with cost advantages in raw materials, energy, healthcare, and currency,” Cliffs said in the statement announcing the sale.

It added that “substantial integration opportunities” will generate synergies around procurement, overhead, and public company-related expenses.

Cliffs also noted that it “will ensure existing local supplier arrangements are maintained.”

Goncalves comments

Lourenco Goncalves, Cliffs’ chairman, president, and CEO, recognized Stelco’s Chairman and CEO Alan Kestenbaum for the company’s “remarkable turnaround … turning what was an underperforming asset under previous ownership into a very cost-efficient and profit-oriented company.”

In perhaps a stab at how U.S. Steel’s sales process was handled, Goncalves commented, “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.”

He said Stelco is a “perfect fit” for Cliffs’ culture because it is a company respectful of the union and its employees.

Union support

David McCall, international president of the United Steelworkers (USW), fully supports the deal.

“Cleveland-Cliffs has a proven track record of making sure the union always has a seat at the table, and this deal was no different,” McCall remarked in Cliffs’ announcement.

“On behalf of our entire membership, I am excited for this transaction and proud to support a deal that is great for the resilience of manufacturing and union jobs in North America,” he added.

Once the deal is finalized, 1,800 USW members will join the Cliffs team. This will almost double Cliffs’ existing payroll in Canada, as it currently has 1,000 employees at seven tooling and stamping plants and a Ferrous Processing and Trading Co. facility in Ontario that it acquired in 2021.

Kestenbaum comments

Kestenbaum has previously said he was looking at different ways to grow Stelco.

Noting his optimism for the North American steel market, Kestenbaum commented on Monday, “One of the important drivers for this transaction was receiving a meaningful portion of the consideration in Cliffs shares.”

He said he believes “that Lourenco and his team have created a winning platform, and I intend to remain an investor in Cliffs for a long time to come as he and his team continue to build out their platform and business.”