Cliffs to buy Canadian steelmaker Stelco

US integrated steelmaker Cleveland-Cliffs will acquire Canadian integrated steelmaker Stelco in a cash and stock deal.

The acquisition of Stelco, an independent steelmaker in Hamilton, Ontario, was announced by both companies this morning. Stelco shareholders will receive C$60/share ($44/share) of Stelco common stock and 0.454 shares of Cliffs common stock, or $C10/share of Stelco common stock. The transaction is valued at C$3.4bn ($2.5bn) and the deal is expected to close in the fourth quarter of 2024, according to a news release.

Stelco will maintain its headquarters in Hamilton, and capital investments of at least C$60mn will be made over the next three years. Stelco will aim to increase production from current levels and will operate as a wholly-owned subsidiary.

In its news release, Cliffs said the purchase of Stelco will double Cliffs' exposure to the flat-rolled spot market, adding that Stelco's primary customer base is service centers buying hot-rolled coil (HRC) products.

Stelco shipped 636,000 short tons (st) of steel products in the first quarter, of which 74pc was HRC, according to a quarterly report.

Cliffs already operates seven tooling and stamping plants in Canada and a scrap yard run by its Ferrous Processing and Trading Company (FPT), all located in Ontario, according to the company.

The head of the United Steelworkers (USW) union, David McCall, is said to support the transaction.

Cliffs' move to buy Stelco comes nearly a year after Cliffs began its failed bid to purchase steelmaking competitor US Steel.

Japanese steelmaker Nippon Steel is now in the midst of negotiating the $15bn purchase of US Steel, a deal that has been the subject of public political hand wringing and open dispute among the executives of Cleveland-Cliffs, US Steel, Nippon Steel and the USW.

By Rye Druzin