U.S. Steel Corp. (X.US) shares fell 5.7% in pre-market trading Monday after the company announced it agreed to buy Canadian steelmaker Stelco Holdings for about $2.5 billion in stock and cash.
Under the terms of the deal, U.S. Steel will buy Stelco for C$70 a share, including C$60 in cash and C$0.454 in common stock, a 87% premium to Stelco’s closing price of C$37.36 on July 12.
U.S. Steel said the deal would provide a clear path to $120m in annual cost savings and expects the acquisition to immediately boost earnings in 2024 and 2025.
The company said the deal had the full support of the United Steelworkers union.
Stelco ships about 2.6m tonnes of flat steel to center customers each year, mostly hot rolled steel. U.S. Steel said the acquisition expands its steelmaking business and doubles its exposure to the flat steel spot market, with cost advantages in raw materials, energy, healthcare and currency.
U.S. Steel said it expects Stelco to continue to operate as a wholly owned subsidiary, retaining its headquarters in Ontario and making at least C$60m in capital investments over the next three years.