U.S. steelmaker Cleveland-Cliffs (NYSE:CLF) announced on Monday its acquisition of Canadian steel company Stelco Holdings in a deal worth $2.5 billion.
Cleveland-Cliffs will pay C$60 per share in cash and 0.454 of a share in stock. The total enterprise value of the deal is about C$3.4 billion. The offer represents an 87% premium to Stelco’s closing share price of C$37.36 on July 12, 2024, and a 37% premium to Stelco’s 52-week high.
Cleveland-Cliffs' shares dropped more than 5% in premarket trading following the announcement.
Fairfax Financial Holdings, along with Lindsay Goldberg LLC, Alan Kestenbaum, and other Stelco directors and executive officers, who collectively own about 45% of Stelco’s outstanding shares, have agreed to vote in favor of the transaction, with customary exceptions.
“I am proud of what we have accomplished over the past seven years, and the value we have generated. This sale crystallizes a 32% CAGR on a Stelco common share investment since our initial public offering in 2017,” said Alan Kestenbaum, Executive Chairman of the Board and CEO of Stelco.
“I want to first recognize Alan Kestenbaum and the Stelco team for the remarkable turnaround they executed at Stelco, turning what was an underperforming asset under previous ownership into a very cost-efficient and profit-oriented company,” said Lourenco Goncalves, Chairman of the Board, President and CEO of Cliffs, in the press release.
“In the process, they restored the Canadian national pride associated with Stelco, and we are going to continue that. We did this deal the way it should be done, reaching a respectful agreement between the two parties that keeps national interests at the forefront and recognizes the importance of the workforce.”
The deal, which has the backing of David McCall, International President of the USW union, is expected to be finalized in the fourth quarter.