(Hamilton) Seven years after emerging from creditor protection and embarking on a major turnaround, Stelco has announced it will be acquired by Cleveland-Cliffs in a $3.4 billion deal.
In a statement Monday, the Hamilton, Ontario-based steelmaker said it had agreed to sell all of its issued and outstanding common shares at $70 each to Cleveland-Cliffs of Ohio, one of North America’s largest steelmakers.
“I know that Cliffs will continue to build on the excellent work and living environment we have created for all of our employees and continue to be a reliable supplier to our valued customers, while preserving Stelco’s stature and reputation in Canada and maintaining our Canadian national position,” said Alan Kestenbaum, Stelco’s Chief Executive Officer.
As part of the deal, Stelco’s head office will remain in Hamilton and the company will maintain “significant levels of employment” in Canada, including retaining Canadians on its management team.
Cleveland-Cliffs President and CEO Lourenco Goncalves praised Mr. Kestenbaum’s success in transforming “an underperforming asset under previous ownership into a highly profitable, profit-driven business.”
The deal is expected to close in the fourth quarter of 2024.
Returned into foreign hands
This won’t be the first time Stelco has been in foreign hands. U.S. Steel acquired the 114-year-old company in 2007, just before the global financial crisis triggered a recession. In 2014, the second-largest U.S. steelmaker placed its Canadian operations under creditor protection.
Mr. Kestenbaum took the helm in 2017 (he left for a year in 2019), modernized Stelco’s blast furnaces and, through acquisitions, steered the company toward increased steel production for automakers.
United Steelworkers International President David McCall supported the sale to Cleveland-Cliffs, calling it “tremendous for the resilience of manufacturing and union jobs” in North America.
“Cleveland-Cliffs has a proven track record of ensuring the union always has a seat at the table, and this agreement is no different,” the union leader said in a statement.
As of December, about 83 percent of Stelco’s 2,400 workers were unionized.
Consolidating against China
Mergers and acquisitions in the sector have dominated headlines over the past year as producers seek to consolidate in response to cheap imports from China.
In August, Cleveland-Cliffs made a $7.25 billion hostile takeover bid to acquire U.S. Steel. But U.S. Steel rejected the offer and opted to buy Japan’s Nippon Steel for $14.9 billion. Nippon Steel is one of the world’s largest steel producers by production volume.
This agreement is pending review by the Committee on Foreign Investment in the United States.
Several media outlets also reported last year that Stelco and an unnamed partner were considering buying US Steel.
Stelco operates two sites in Ontario: a steel mill at Lake Erie Works and a facility at Hamilton Works, which includes a coking plant and finishing operations.
National Bank analyst Maxim Sychev called the Cleveland-Cliffs deal “a logical development for the industry.”
“We expect the deal to be revised, but one would assume the context would be less contentious than that between US Steel and Nippon, given the already integrated nature of the North American supply chain, CUSMA, etc.,” he commented in a note to investors.