Cleveland-Cliffs (NYSE: CLF) hopes that it can forge considerable value with its new Canadian partner Stelco Holdings. Cleveland-Cliffs, an American steelmaker, has announced its plan to acquire Canadian steelmaker Stelco Holdings for C$3.85 billion ($2.8 billion). This marks Cleveland-Cliffs' first major acquisition since its unsuccessful bid for U.S. Steel last year. The deal offers a combination of cash and stock, valuing Stelco at C$70.00 (US$51.15) per share, a significant premium over its last closing price of C$37.36 (US$27.30). The company expects the buyout to immediately boost its per-share profit for 2024 and 2025.
Stelco is expected to continue operating as a wholly owned unit of Cleveland-Cliffs. It operates two sites in Ontario: a steelmaking facility in Lake Erie Works and a finishing and coke-making facility in Hamilton Works.
Who Is Cleveland-Cliffs?
Founded as a mine operator in 1847, Cleveland-Cliffs is North America’s largest flat-rolled steel manufacturer. As a primary supplier of automotive-grade steel, the business controls its entire pipeline, from mined raw materials to steelmaking, finishing, stamping, and tooling. This self-sufficiency gives the company a competitive advantage. Cleveland-Cliffs makes various steel products and has committed to environmental sustainability initiatives.
The company’s CEO points out that the acquisition is more cost-effective than building a new U.S. mill. This move comes after Cleveland-Cliffs' unsuccessful $7.3 billion bid for U.S. Steel in August 2023, which ultimately merged with Nippon Steel for $14.9 billion.
This acquisition is designed to expand Cleveland-Cliffs' market presence and production capabilities in North America. The union has the blessing of the United Steelworkers (USW) union and is expected to close in the fourth quarter of 2024.
Best Outcomes
The deal is anticipated to expand Cleveland-Cliffs' steelmaking capacity and double its exposure to the flat-rolled spot market. The company also expects to see cost advantages in raw materials, energy, currency, and healthcare costs. Although this sounds promising, CLF shares dropped 3% in premarket trading following the announcement. The company is scheduled to release its Q2 2024 results following the market close on July 22. While analysts expect that the company benefited from high volume and lower production costs, lower steel prices likely slowed its performance. Analysts’ consensus rating is a Hold on the stock, with a price target of $18.30. It’s currently trading at $15.50.
Neither Julie Stoller nor Stocks.News have positions in this company.
Did you find this insightful?
Bad
Just Okay
Amazing
Disclaimer: Information provided is for informational purposes only, not investment advice. We do not recommend buying or selling stocks. Stock price discussions are based on publicly available data. Readers should conduct their own research or consult a financial advisor before investing. Owners of this site have current positions in stocks mentioned thru out the site, Please Read Full Disclaimer for details Here https://app.stocks.news/page/disclaimer
Contributing Writer
As a professional writer since 2012, Julie Stoller has covered many industries, from healthcare and technology to consumer products and industrials. She has written about IPOs, spinoffs, ETFs, stock splits, commodities, legislative actions impacting investors, and macroeconomic issues. While keeping up with the latest meme stocks and trends, Julie's special interests are discovering ...