Unconfirmed reports say Stelco may be eyeing an audacious takeover of some parts of U.S. Steel. More likely though, writes David Olive, Canada’s biggest steelmaker may become a takeover target.
Six years into his impressive turnaround of Stelco Holdings Inc., CEO Alan Kestenbaum has transformed the company into one of the lowest-cost, highest-margin steelmakers on the continent. But Kestenbaum has fallen short of a goal he set back in 2017 when he bought the 113-year-old Stelco out of bankruptcy. At that time, he hoped to boost Stelco’s revenues to as much as $8 billion.
With 2022 sales of $3.5 billion, Canada’s biggest steelmaker remains one of the continent’s smaller producers. It still lacks the economies of scale to withstand industry disruptions as easily as its bigger U.S. rivals.
That explains recent reports, so far unconfirmed by Kestenbaum, that the Hamilton-based Stelco is eying an audacious bid to acquire all or parts of the much larger United States Steel Corp. of Pittsburgh (U.S. Steel). U.S. Steel shipped 16 million tons of steel last year to Stelco’s 2.6 million tons. There would be an element of revenge in a Stelco play for U.S. Steel.
During its eight-year ownership of Stelco beginning in 2007, U.S. Steel so badly managed its Canadian operations that it had to place Stelco in bankruptcy protection in 2014.