U.S. steel manufacturing giant Cleveland-Cliffs has struck a $2.8 billion deal to acquire Canada’s steel company Stelco. The move comes after Cleveland-Cliffs missed out in its attempt to buy United States Steel Corp. in late 2023.
Cleveland-Cliffs is the largest flat-rolled steel producer in North America and one of the top three largest steel producers in the United States. The company has seen a significant rise in recent years, becoming the top automotive steel supplier in the country, and has been lately aggressive in its attempts to increase its footprint in the steelmaking industry.
The shareholders of Stelco will get cash as well as shares as part of the acquisition. The shares will be worth C$70, marking an 87% premium on the stock’s closing price of C$37.36 on Friday. According to Cleveland-Cliffs’ CEO Lourenco Goncalves, the large premium is well worth it as his company sees Stelco as an “undervalued” company.
“Stelco was completely undervalued in the marketplace. Cleveland-Cliffs is buying a fantastic company at the bottom of the market — because we understand the cyclicality of this business,” Goncalves said in a call with analysts on Monday.
The deal is expected to be completed in the last quarter of 2024 after it receives approval from Stelco’s shareholders, who are in favor of the sale, and gets cleared by regulators.