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Cleveland-Cliffs Inc. announced Monday its agreement to purchase Canadian steelmaker Stelco Holdings Inc. at an enterprise value of $2.5 billion. This acquisition follows the Ohio-based steel company's contentious failed bid to buy U.S. Steel last year.

Cleveland-Cliffs to buy Stelco For $2.5B : Legal Representation

Davis Polk & Wardwell LLP and Blake Cassels & Graydon LLP are representing Cleveland-Cliffs. McCarthy Tétrault LLP and A&O Shearman serve as legal counsel to Stelco. Stikeman Elliott LLP advises a special committee of Stelco's board.

Transaction Details

Under the agreement, Stelco shareholders will receive a total of CA$70 ($51.25) per share of common stock, comprised of CA$60 in cash per share and 0.454 shares of Cleveland-Cliffs common stock. Lourenco Goncalves, chair, president, and CEO of Cleveland-Cliffs, highlighted that the acquisition cost is "significantly lower" than building a comparable steel mill in the U.S.

The transaction has been unanimously approved by the boards of both companies and is expected to close in the fourth quarter of 2024, pending shareholder and regulatory approvals.

Cleveland-Cliffs to buy Stelco For $2.5B : Previous Dispute with U.S. Steel

The deal comes after a bitter dispute between Cleveland-Cliffs and U.S. Steel, which announced a $14.9 billion sale to Japan's Nippon Steel last December. Cleveland-Cliffs' offer was rejected by U.S. Steel in August. Goncalves criticized the Nippon deal, calling it a "historic M&A fiasco" and suggesting it would be blocked due to national interest concerns raised by President Joe Biden and other lawmakers.

U.S. Steel defended its decision, accusing Cleveland-Cliffs of spreading misinformation and false rumors. The dispute underscored the competitive tension within the steel industry.

Support from United Steelworkers

Cleveland-Cliffs' acquisition of Stelco has received full support from David McCall, international president of the United Steelworkers (USW), adding 1,800 more USW employees to its workforce. Goncalves praised Stelco's respect for unions and its employee relations, noting that Stelco is a perfect cultural fit for Cleveland-Cliffs.

"We look forward to proving that our ownership of Stelco will be a net benefit for Canada, the province of Ontario, and the cities of Nanticoke and Hamilton," Goncalves said.

Operational Continuity

Stelco operates two sites in Ontario, shipping approximately 2.6 million net tons of flat-rolled steel annually. After the acquisition, Stelco is expected to retain its name and headquarters in Hamilton, Ontario, operating as a wholly owned subsidiary of Cleveland-Cliffs.

Alan Kestenbaum, executive chair and CEO of Stelco, expressed confidence in Cleveland-Cliffs' commitment to Stelco's workforce and customers. "I know that Cliffs will continue to build upon the excellent work and life environment we have created for all of our employees, and continue to be a reliable supplier to our valued customers," Kestenbaum said.

Cleveland-Cliffs to buy Stelco For $2.5B : Legal Teams

The A&O Shearman team representing Stelco is led by merger and acquisition partners Sean Skiffington, and includes capital markets partners Ryan Robski and Jason Lehner; tax partner Larry Crouch; compensation, governance, pensions and employment partner Jai Garg; and antitrust partners Ben Gris and Jonathan Cheng.