American steel manufacturer Cleveland-Cliffs (CLF) is buying Canadian rival Stelco Holdings (STLC) for $3.85 billion.
The move to acquire Stelco comes after Cleveland-Cliffs attempt to purchase U.S. Steel Corp. (X) last year failed.
Stockholders of Stelco will receive $70 per share, representing a premium of 87% over the company’s current share price of $37.36.
The Stelco purchase is the latest attempt to grow Cleveland-Cliffs. Chief executive officer (CEO) Lourenco Goncalves has built the company from an iron ore miner into one of the top four U.S. steel producers and America’s largest supplier of steel to the automotive industry.
Last year, Cleveland-Cliffs lost its bid for U.S. Steel to Nippon Steel Corp. of Japan.
Stelco currently operates two facilities in Ontario and ships 2.6 million net tons of flat-rolled steel annually.
The purchase of Stelco will expand Cleveland-Cliffs’ steelmaking footprint and double its exposure to the flat-rolled steel market, say analysts.
Stelco, once called the “Steel Company of Canada,” was founded in 1910. The company filed for bankruptcy in the mid-2000s and subsequently restructured.
Stelco’s largest shareholders, Fairfax Financial Holdings and Kestenbaum, are supporting the sale to Cleveland-Cliffs.
The deal also reportedly has support form the United Steelworkers union. The acquisition is expected to close in the fourth quarter of this year.
Prior to today, Stelco’s stock was down 25% this year and trading at $37.36 per share.
The stock of Cleveland-Cliffs has declined 18% on the year and is trading at $16.17 U.S. per share.
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