Cleveland-Cliffs to buy Stelco in $2.5bn deal

US flat-rolled steel producer Cleveland-Cliffs said on Monday that it has agreed to buy Stelco in a $2.5bn cash and stock deal.

Under the terms of the transaction, Stelco shareholders will receive CAD60.00 per share in cash and 0.454 shares of Cliffs common stock per share.

Stelco is a low-cost, integrated and independent steelmaker. It has two operational sites, both located in the province of Ontario: Lake Erie Works, the newest and lowest-cost integrated steelmaking facility in North America; and Hamilton Works, a downstream finishing and coke-making facility.

Cleveland-Cliffs said Stelco ships about 2.6 million net tons of flat-rolled steel annually, primarily hot-rolled steel to service centre customers.

"The acquisition of Stelco expands Cliffs’ steelmaking footprint and doubles Cliffs’ exposure to the flat-rolled spot market, with cost advantages in raw materials, energy, healthcare, and currency," it said.

"Stelco adds capabilities that complement Cliffs’ existing operations and product portfolio, while diversifying its customer base across the construction and industrial sectors. The transaction brings substantial integration opportunities, generating synergies associated with procurement, overhead, and public company related expenses."

Cleveland-Cliff said the acquisition is expected to be immediately accretive to 2024 and 2025 earnings per share.