Replies to post #29395 on The Rising Influence of Rising Affluence

[DewDiligence]

One CLF director, Douglass Taylor, went against the grain and sold $500K worth of stock two days ago:

https://www.sec.gov/Archives/edgar/data/764065/000076406524000152/xslF345X05/wk-form4_1718317004.xml

Taylor still owns >100,000 shares (~$1.5M worth).

[DewDiligence]

CLF acquires Canada’s Stelco for $2.5B* cash/stock—an 87% premium to STLC.TO’s closing price on 7/12/24:

https://finance.yahoo.com/news/cleveland-cliffs-announces-acquisition-stelco-100000705.html

Cleveland-Cliffs Inc…is pleased to announce that it has entered into a definitive agreement to acquire Stelco Holdings Inc. (TSX:STLC) ("Stelco"). The acquisition confirms Cliffs’ commitment and leadership in integrated steel production in North America, and also brings an additional 1,800 United Steelworkers ("USW") union employees into Cliffs’ workforce.

Under the terms of the agreement, Stelco shareholders will receive CAD $60.00 per Stelco common share in cash and 0.454 shares of Cliffs common stock per share of Stelco common stock (or CAD $10.00 per share as of July 12, 2024), representing a total consideration of CAD $70.00 per Stelco share.

The transaction has received full support from David McCall, International President of the USW union.

The transaction implies a total enterprise value of approximately USD $2.5 billion (CAD $3.4 billion) for Stelco and represents an acquisition multiple of 4.8x 3/31/24 LTM [last twelve months] Adjusted EBITDA with synergies. Cliffs has a clear line of sight to the achievement of approximately $120 million of estimated annual cost savings with no impact to union jobs.

The acquisition is expected to be immediately accretive to 2024 and 2025 EPS. The transaction implies pro forma net leverage of 2.4x 3/31/2024 LTM Adjusted EBITDA. Upon completion of the transaction, Cliffs shareholders will own approximately 95% and Stelco shareholders will own approximately 5% of the combined company, on a fully diluted basis.

Stelco is an integrated steelmaker consisting of 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 cokemaking facility. Stelco ships approximately 2.6 million net tons of flat-rolled steel annually, primarily hot-rolled steel to service center customers.

…Upon closing of the transaction, Stelco is expected to continue operations as a wholly-owned subsidiary, preserving the name and legacy of the business.

… The transaction has been unanimously approved by Cliffs’ and Stelco’s respective Boards… The transaction is expected to close in the fourth quarter of 2024, subject to approval by Stelco shareholders, receipt of regulatory approvals and satisfaction of other customary closing conditions.

*Enterprise value. The nominal deal value (i.e. the market value of the cash + stock consideration) is approximately $2.8B (C$3.85B). $1 = C$1.36.

[DewDiligence]

CLF insiders were actively buying shares on the open market only one month before the announcement of the Stelco deal, which is rather surprising—and patently bullish.

[DewDiligence]

CLF independent director bought $116K of stock today on the open market:

https://www.sec.gov/Archives/edgar/data/764065/000076406524000169/xslF345X05/wk-form4_1722539569.xml

The director who bought today, John Baldwin, also bought $1M worth of stock on 6/13/24 (#msg-174593789).

Recap—CLF has had six insider buys since 5/1/24 totaling $2.6M of stock: $1M by the CEO (#msg-174587787); $100K by the CFO (#msg-174587787); and four purchases of a cumulative $1.5M by independent directors (#msg-174593789, #msg-174595056, and today’s transaction).