HAMILTON, Ontario - Stelco Holdings Inc. (TSX: STLC) has agreed to a takeover by Cleveland-Cliffs Inc. (NYSE: NYSE:CLF) in a transaction valued at approximately C$3.4 billion. The deal will see Cleveland-Cliffs acquire all issued and outstanding common shares of Stelco for C$70.00 per share, comprising C$60.00 in cash and 0.454 of a Cleveland-Cliffs common share per Stelco share, based on Cliffs' closing stock price on July 12, 2024.
The offer represents an 87% premium over Stelco's closing share price on July 12, 2024, and a 37% premium to its 52-week high. Major Stelco shareholders, holding collectively about 45% of its outstanding shares, have agreed to vote in favor of the transaction.
The board of Stelco has unanimously recommended that shareholders approve the deal, citing the immediate and compelling value to shareholders, the opportunity to participate in the growth and synergies expected from the transaction, and the strong operational track record of Cleveland-Cliffs.
The acquisition is subject to customary closing conditions, including shareholder, court, and regulatory approvals. Stelco plans to hold a special shareholder meeting this fall to vote on the transaction, with further details to be announced later in the summer.
Upon completion, Stelco's shares will be delisted from the TSX, and the company will apply to cease being a reporting issuer in Canada. Cleveland-Cliffs will preserve Stelco's headquarters in Hamilton, continue significant operations in Hamilton and Nanticoke, and maintain the Stelco name and legacy in Canada.
The transaction is expected to close in the fourth quarter of 2024, assuming timely receipt of all necessary approvals.
The information in this article is based on a press release.
In other recent news, Cleveland-Cliffs has experienced several significant developments. The company recently announced the resignation of Janet L. Miller from its Board of Directors, a change that does not indicate any internal conflicts according to the company's 8-K filing with the Securities and Exchange Commission. Meanwhile, Congressman Mike Kelly has made a substantial purchase of Cleveland-Cliffs shares, valued between $50,001 and $100,000.
In the realm of financial analysis, B.Riley has adjusted the price target for Cleveland-Cliffs shares to $23.00, maintaining a Buy rating despite lower hot-rolled coil steel prices. However, JPMorgan (NYSE:JPM) downgraded the company from Overweight to Neutral, reducing the price target to $17 due to revised pricing forecasts and concerns over increasing capital expenditure needs.
Additionally, Cleveland-Cliffs has refuted claims made by the U.S. Steel Board regarding potential acquisitions, maintaining its commitment to keeping U.S. Steel American-owned. Amid these developments, the company has revealed a rebound in profitability with an adjusted EBITDA of $414 million and initiated a new $1.5 billion share repurchase program.
InvestingPro Insights
In light of the recent acquisition announcement, Cleveland-Cliffs Inc. (NYSE: CLF) has shown significant strategic moves that may interest shareholders and potential investors. Notably, management's aggressive share buyback program indicates a strong belief in the company's intrinsic value. Additionally, the company's valuation suggests a robust free cash flow yield, which could be a compelling factor for those looking for investment opportunities with potential for capital returns.
From a financial perspective, Cleveland-Cliffs' market capitalization stands at $7.69 billion, with a Price/Earnings (P/E) ratio of 21.12, which adjusts down to 13.31 when considering the last twelve months as of Q1 2024. This adjustment suggests a more favorable earnings outlook relative to the company's share price. Moreover, the company's Price/Book ratio of 1.07 for the same period indicates that the stock may be reasonably valued in relation to its net asset value.
Investors should note that while some analysts have revised their earnings estimates downwards for the upcoming period, Cleveland-Cliffs is still expected to be profitable this year and has been profitable over the last twelve months. These factors, combined with the company's position as a prominent player in the Metals & Mining industry, could provide a level of stability and growth potential post-acquisition.
For more detailed analysis and additional InvestingPro Tips, including insights on shareholder yield and gross profit margins, visit InvestingPro. There are 11 additional tips available for Cleveland-Cliffs, which could further inform your investment decisions. Don't forget to use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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