Cleveland-Cliffs Acquires Stelco Holdings Inc.

By Tamara Parker • Tuesday, July 16 06:02 • Permanent Link

Cleveland-Cliffs Inc. has announced its acquisition of Stelco Holdings Inc., solidifying its position as a leader in integrated steel production in North America. The acquisition, with a total enterprise value of approximately USD $2.5 billion (CAD $3.4 billion), represents an acquisition multiple of 4.8x 3/31/24 LTM adjusted EBITDA with synergies.

This acquisition is expected to bring about $120 million of estimated annual cost savings with no impact to union jobs. It will also be immediately accretive to 2024 and 2025 EPS. The transaction implies pro forma net leverage of 2.4x 3/31/2024 LTM adjusted EBITDA.

Upon completion of the transaction, Cliffs shareholders will own approximately 95% and Stelco shareholders will own approximately 5% of the combined company, on a fully diluted basis.

Stelco, an integrated steelmaker with two operational sites in Ontario, ships approximately 2.6 million net tons of flat-rolled steel annually, primarily hot-rolled steel to service center customers. This acquisition will expand Cliffs’ steelmaking footprint and double its exposure to the flat-rolled spot market, providing cost advantages in raw materials, energy, healthcare, and currency.

The transaction has been unanimously approved by both Cliffs' and Stelco's respective boards and is expected to close in the fourth quarter of 2024, subject to approval by Stelco shareholders, receipt of regulatory approvals, and satisfaction of other customary closing conditions.

In addition to the financial aspects, the acquisition is expected to have a positive impact on employment and local communities. Cliffs plans to preserve the name and legacy of Stelco in Hamilton, Nanticoke, and Canada. Stelco will continue significant operations in Hamilton and Nanticoke, make capital investments of at least CAD $60 million over the next three years, and maintain significant employment levels in Canada.

The transaction also has the support of the United Steelworkers union, with David McCall, the international president of the USW, expressing excitement and pride in the deal, emphasizing the resilience of manufacturing and union jobs in North America.

Following these announcements, the company's shares moved 0.2%, and are now trading at a price of $16.21. For the full picture, make sure to review Cleveland-Cliffs's 8-K report.

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