Cleveland-Cliffs has made a pivotal move in the steel industry with its acquisition of Stelco Holdings, marking a significant expansion of its integrated steel production capabilities across North America. The transaction, valued at approximately $2.5 billion, solidifies Cliffs' leadership position and underscores its commitment to strategic growth in the steel sector.
Under the terms of the agreement, Stelco shareholders will receive C$60.00 in cash per share and 0.454 shares of Cliffs common stock for each Stelco common share, totaling CAD $70.00 per share. This valuation reflects a strategic alignment aimed at maximizing shareholder value and leveraging synergies between the two companies. The acquisition has received unanimous support from stakeholders, including David McCall, International President of the United Steelworkers union, highlighting its positive impact on union jobs and industry resilience.
Financially, Cliffs anticipates achieving approximately USD $120 million in annual cost savings, driven by synergies in procurement, overhead management, and operational efficiencies. The transaction is expected to be immediately accretive to earnings per share for both 2024 and 2025, with a pro forma net leverage ratio of 2.4x 3/31/2024 LTM Adjusted EBITDA. Upon completion, Cliffs shareholders will hold approximately 95% of the combined entity, reinforcing its market leadership.
Stelco, with its robust operations in Ontario, operates key facilities including Lake Erie Works and Hamilton Works, which collectively produce 2.6 million metric tons of flat-rolled steel annually. This acquisition doubles Cliffs' exposure to the flat-rolled steel market, enhancing its competitive edge through Stelco's cost efficiencies in raw materials, energy, and currency advantages.
Lourenco Goncalves, Chairman, President, and CEO of Cliffs, emphasized the strategic fit between the two companies and praised Stelco's operational turnaround under Alan Kestenbaum, Executive Chairman and CEO of Stelco. Goncalves highlighted the transaction's importance in maintaining national interests and supporting local communities in Canada.
Alan Kestenbaum expressed pride in Stelco's achievements and the substantial returns generated for shareholders since its IPO. Kestenbaum expressed confidence in Cliffs' leadership and the growth potential of the North American steel market, affirming his commitment as an investor in Cliffs' long-term success.
David McCall, representing USW, lauded the transaction for its positive implications on manufacturing resilience and union jobs in North America. McCall emphasized Cliffs' commitment to union interests and its collaborative approach that benefits stakeholders across the steel supply chain.
Looking forward, Cliffs plans to preserve Stelco's legacy as a wholly-owned subsidiary, maintaining its headquarters in Hamilton and upholding commitments to local employment, community engagement, and sustainable business practices. The transaction is subject to regulatory approvals and customary closing conditions, with a targeted completion in the fourth quarter of 2024.
