Cleveland-Cliffs Inc. has entered into a definitive agreement to acquire Stelco Holdings Inc in a transaction valued at $2.5 billion. Stelco has two operations in Ontario, Canada, the Lake Erie Works, the newest and lowest-cost integrated steelmaking facility in North America; and the Hamilton Works, a downstream finishing and cokemaking facility. Stelco ships approximately 2.6 million net tons of flat-rolled steel annually, primarily hot-rolled steel to service center customers.
The Cliffs said the acquisition will expand its steelmaking footprint and double its exposure to the flat-rolled spot market. It will also diversifying its customer base across the construction and industrial sectors. Upon closing of the transaction, Stelco is expected to continue operations as a wholly-owned subsidiary, preserving the name and legacy of the business.
“I want to first recognize Alan Kestenbaum and the Stelco team for the remarkable turnaround they executed at Stelco, turning what was an underperforming asset under previous ownership into a very cost-efficient and profit-oriented company,” said Lourenco Goncalves, chairman, president and CEO of Cliffs. “They restored the Canadian national pride associated with Stelco, and we are going to continue that. 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.
“The enterprise value of this transaction is significantly lower than the cost of building an equivalent replacement mill in the United States, and the cost structure is lower than what a new U.S. mill would provide us,” Goncalves said. “Stelco is a company that respects the Union, treats their employees well, and leans into their cost advantages. With that, they are a perfect fit for Cleveland-Cliffs and our culture. We look forward to proving that our ownership of Stelco will be a net benefit for Canada, the province of Ontario, and the cities of Nanticoke and Hamilton.”
“I am proud of what we have accomplished over the past seven years, and the value we have generated,” said Alan Kestenbaum, executive chairman and CEO of Stelco. “This sale crystallizes a 32% compound annual growth rate on Stelco shares since our IPO in 2017. Most importantly, we have revitalized Stelco and restored it to its iconic status in Canada. I know that Cliffs will continue to build upon the excellent work and life environment we have created for all of our employees, and continue to be a reliable supplier to our valued customers, while maintaining Stelco’s stature and reputation in Canada and maintaining our Canadian national interests.”
