Hamilton steelmaker Stelco sold to Cleveland-Cliffs for $3.4B
Hamilton-based steelmaker Stelco Holdings Inc. is set to be acquired by Cleveland-Cliffs Inc. for $3.4 billion.
Stelco said it has agreed to sell all issued and outstanding common shares for $70 per share to the Cleveland-based steel producer.
Stelco chief executive Alan Kestenbaum said he is confident Cleveland-Cliffs will remain a reliable supplier to its customers, while maintaining Stelco's "stature and reputation in Canada and maintaining our Canadian national interests."
Alan Kestenbaum is the CEO and executive chairman of Stelco. (Bedrock Industries)
Currently, Stelco maintains two major steelmaking facilities in Ontario – one in Hamilton and the other in Nanticoke.
CBC Hamilton reached out to Stelco for an interview. However, the company said no one was available for comment.
Stelco said, in a news release, that as part of the agreement it will keep its headquarters in Hamilton and build on its existing 1,000-employee footprint in Canada. It will also retain Canadian representation on its management team.
The news release also said Cleveland-Cliffs will continue Stelco's current community commitments, including collaboration with McMaster University and the CanmetMATERIALS research centre, and maintain the existing research chairs with McMaster University. The company will also retain its partnership with the Hamilton Tiger-Cats and Forge FC, and its 40 per cent equity interest and the master lease of Tim Hortons Field.
Getting Nanticoke was 'the real gem,' expert says
Kestenbaum acquired Stelco in 2016 after the company went into creditor protection in 2004 and was sold as a subsidiary to U.S. Steel Co. in 2007. It then returned to creditor protection in 2014 before signing an agreement to be acquired by Kestenbaum's Bedrock Industries L.P. in late 2016.
Cleveland-Cliffs president and CEO Lourenco Goncalves says Kestenbaum was able to turn an "underperforming asset under previous ownership into a very cost-efficient and profit-oriented company."
He says the deal "keeps national interests at the forefront and recognizes the importance of the workforce," noting Stelco respects the union representing its workers, "treats their employees well and leans into their cost advantages."
Marvin Ryder is a marketing and business professor at McMaster University in Hamilton. (McMaster University)
Marvin Ryder, an associate professor of marketing and entrepreneurship at the DeGroote School of Business at McMaster University, said one of the likely reasons for the purchase of the company is to acquire Stelco's plant in Nanticoke, which he says is a modern and efficient steelmaking operation.
"If I was interested in buying the former Stelco, it wouldn't be for what it had in Hamilton, it would be for what it had down the road in Nanticoke… In many ways I would have called it the crown jewel of the Stelco operations," he said.
Ryder said Stelco's operation will be business as usual once the sale closes later in the year. However, he said things could change a few years later. One possibility he sees is that instead of making steel at Nanticoke and transporting it to Hamilton for value-added finishing, the company could consolidate its operations at the Nanticoke site.
"I suspect they'll keep [the finishing operations in Hamilton] at least for a while. But the real gem that they were acquiring wasn't really the Hamilton operations, it was the Nanticoke operations," he said.
