By Jerry Burnes/Iron Range Today
Cleveland-Cliffs announced Monday that it’s agreed to purchase Canadian steelmaker Stelco in a deal valued at $2.8 billion, pending regulatory approval in the U.S. and Canada.
The agreement was struck following a Cliffs bid to purchase its primary rival U.S. Steel last year, and represents the broadening of the company’s reach, which has seen it buy up AK Steel and ArcelorMittal USA in recent years.
Lourenco Goncalves, chairman, president and CEO of Cliffs, said on a conference call Monday morning that the purchase was a “no-brainer” and is expected to close at the end of the year.
“When the opportunity became available, we had to pursue it,” Goncalves said, noting the United Steelworkers approved of the deal. “Stelco is a plug-and-play asset for Cleveland Cliffs.”
Implications of the Stelco deal could have ripple effects on U.S. Steel and the Iron Range, but to what extent remains unclear at this point. U.S. Steel offered Stelco a 25% share of its Minntac operation in 2020 as an immediate cash infusion during the COVID-19 pandemic.
Under the terms, Stelco paid U.S. Steel $100 million in cash with an additional $500 million option that Stelco could exercise in 2027 to finalize its ownership stake. In the interim, Stelco had received a pellet supply agreement from the Minntac plant, through 2027, at a below-market rate at the time.
Stelco could pick up the option at any point before Jan. 31, 2027, but U.S.Steel also has a termination clause in the deal, according to SEC filings, that would reimburse Stelco up to $120 million if Minntac’s majority owner opted out.
Goncalves acknowledged the Minntac agreement, but declined to expand on a path forward should Cliffs close out its Stelco purchase.
“It has value and it was part of the package that we acquired,” he said. “So yes, going forward, as we close the deal, we will have that optionality.”
A spokesperson for U.S. Steel was unavailable for comment as of early Monday.
U.S. Steel notably started its own sale process to the Japanese-run Nippon Steel earlier this year, which has faced stiff opposition from politicians and the United Steelworkers. Cliffs aggressively pursued its Pittsburgh-based rival but U.S. Steel ultimately went the Nippon path, citing antitrust concerns in closing with Cliffs.
Officials at U.S. Steel have maintained the deal will clear regulators and close this year, but Goncalves didn’t close the book pursuing its rival again should it fall through, noting Monday — though not mentioning U.S. Steel by name — it would happen “at a different price point” than the current $14.1 billion sale price.
“This quarter, we achieved significant milestones as we progress towards closing the transaction with Nippon Steel Corporation, obtaining overwhelming approval by our shareholders and the receipt of all non-U.S. regulatory approvals,” U.S. Steel CEO David Burritt said in a June 17 press release on second quarter guidance for the company. “We continue to work towards the remaining U. S. regulatory approvals, and look forward to closing the transaction that will bring advanced technologies to U. S. Steel to support a stronger domestic steel industry with enhanced competition and will strengthen national security, economic security and job security.”
