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Cleveland-Cliffs Gets Final Approval For $2.5B Stelco Deal

By  |  October 31, 2024

Cleveland-Cliffs, the prominent steel producer headquartered in Ohio, is poised to close its $2.5 billion acquisition of Canadian steel company Stelco Holdings Inc. by the end of the week. Following a series of Canadian regulatory clearances, Cleveland-Cliffs announced Wednesday that it expects the transaction to be completed on Friday. According to US Herald, this marks the culmination of a months-long process, with both the Investment Canada Act and the Strategic Innovation Fund now granting final approvals for the merger, building on prior clearance from U.S. regulatory bodies earlier this month.

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    Financial Structure and Terms of the Deal

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    Initially agreed upon in July, the acquisition is valued at approximately $2.5 billion. Cleveland-Cliffs was advised by the law firms Davis Polk & Wardwell LLP and Blake Cassels & Graydon LLP, while McCarthy Tétrault LLP and A&O Shearman represented Stelco. Additionally, the special board committee for Stelco received guidance from Stikeman Elliott LLP, per US Herald.

    Related: Cleveland-Cliffs Clears Regulatory Hurdle in Stelco Acquisition

    Under the finalized terms, Stelco’s shareholders will be compensated at a rate of CA$70 per share, roughly equivalent to $51.25 in U.S. dollars. This payment includes CA$60 in cash and an additional 0.454 shares of Cleveland-Cliffs stock per Stelco share. Lourenco Goncalves, the chair, president, and CEO of Cleveland-Cliffs, noted that this acquisition represents a strategic, cost-effective move that circumvents the need to establish a new steel mill in the United States.

    Strategic Impact and North American Expansion

    As part of the agreement, Stelco’s operations, which encompass two major production facilities in Ontario, will continue under the Stelco brand as a subsidiary of Cleveland-Cliffs. The sites currently produce approximately 2.6 million net tons of flat-rolled steel each year, a substantial output that is expected to significantly bolster Cleveland-Cliffs’ production capacity across North America. According to US Herald, the acquisition comes at a time when demand for flat-rolled steel products is surging, positioning Cleveland-Cliffs to better meet the growing needs of the automotive and construction sectors in both Canada and the United States.

    Source: USA Herald