Canadian Steel Maker Looks for Buyer

This would be the end of an era for Stelco. Friends of my family worked at Stelco going back to the ’60s.

NY Times

Stelco, Canada’s last domestically owned steel maker, said Friday that it was in early talks that might lead to its sale.

While foreign buyers have gradually taken control of Canada’s other steel companies, including Dofasco, Stelco remains independent, largely because it is unprofitable and some of its plants are outdated. Stelco emerged from a prolonged period of bankruptcy restructuring in March 2006 burdened with debt and pension obligations.

Stelco shares skyrocket as steel maker seeks buyer

The Toronto Star
Stelco Inc. shares shot up yesterday after the money-losing steel giant revealed it is looking at a possible sale or partnership after almost a century as a Canadian industrial icon.

The company’s shares soared $5.03 – or more than 18 per cent – to $31.93 on heavy trading volume on the Toronto Stock Exchange, as investors bet on potential suitors pushing up the company’s value.

Stelco sale would be end of era for Canadian steel

Reuters via Yahoo

The Canadian steel industry, which has been thinned by a slew of foreign takeovers, could lose its last big domestic-owned steelmaker after Stelco Inc. put itself on the auction block on Friday.

But Stelco’s confirmation that it has put itself up for sale did not come as a surprise given a rapidly consolidating global steel industry that has seen big foreign companies feast on Canadian steelmakers.

“Stelco, in a Canadian context, was the last man on the block,” said Randy Cousins, an analyst at BMO Capital Markets. “So is it a surprise that we are seeing this announcement? Not at all. It’s just a continuation of what’s been going on.”

Here is the official announcement, off the Stelco website.

HAMILTON, ON, Jun 1, 2007 (Canada NewsWire via COMTEX News Network) — Stelco Inc. (TSX: STE) today confirmed that it is reviewing strategic options for the company in light of the ongoing consolidation in the steel industry. The company has appointed a special committee of directors and CIBC World Markets and UBS to assist it in this review. The company intends to evaluate a broad range of possible alternatives including mergers, strategic partnerships, acquisitions or a sale of all or part of the company.
Discussions regarding these alternatives with third parties are at a very preliminary stage and there have been no discussions on the material terms of any transaction.

There’s a lot more, but that’s the gist of it.

North American Steel prices, lead times rising

LATEST MARKET ROUNDUP FROM MEPS
US buyers have accepted further transaction price increases. The driving force is a lack of supply. All domestic mills are operating an allocation policy for customers, with no extra tonnage to be had. Several are working below normal rates due to a variety of production/labour issues. Availability is even tighter because very few imports are being offered.
Canadian market conditions are very strong. Transaction values have moved up and the trend is likely to continue. Supply is constrained, with Stelco telling some buyers they will have no material until August. This is partly due to trying to build up stocks to protect major contract customers ahead of an anticipated strike on July 31. Inventories are low at most service centres and distributors’ profit margins have improved. Importers have stepped up their offers for August/September arrivals by $C100 per tonne.

Remember, MEPS is a supply side reporter, so when they say market conditions are strong, that means good for the steel supplier.

Stelco confirms delisting of common shares

Stelco Inc.
The Company had announced on March 3, 2006 that its board of directors had authorized the filing of a delisting application. As disclosed on previous occasions, there is insufficient value in the Company under the approved restructuring plan to provide recovery for the current common shareholders. As a result, the existing common shares will be eliminated on plan implementation with no value being attributed to them.

Stelco completes sale of Norambar, Stelwire and Stelfil to Mittal

Stelco Inc.
Stelco Inc. today announced that it has received a Court Order facilitating the sale of the shares of Norambar Inc., Stelwire Ltd. (‘Stelwire’) and Stelfil Ltée to Mittal Canada Inc. (‘Mittal’). The Order was granted at a hearing held this morning, notwithstanding that Stelwire was still an applicant under Stelco’s CCAA proceedings. As a result of this Order, the transaction closed today.
A definitive agreement in this matter was announced on November 23, 2005 with the stated expectation that the transaction would close early in 2006. The Court approved the sale on December 12, 2005.

Canada’s Steel Center Seeks Stelco Buyout After Dofasco Deal

Bloomberg.com: Canada
Canada’s steel hub of Hamilton, Ontario, has plenty of reasons to watch the billion-dollar takeover battle for steelmaker Dofasco Inc. Workers at Stelco Inc. hope it’s a sign their employer, heading out of bankruptcy, will be next to draw buyer interest.
“It’d be a fresh start,” said Harry Fitzpatrick, 53, a carpenter for 30 years at Stelco. He boarded a bus in Hamilton this week to attend the company’s bankruptcy hearing at a Toronto court.
Stelco is ready to emerge from two years of bankruptcy protection in March, just as global steel producers such as Arcelor SA seek additional capacity to meet increasing demand from China and India. That puts it in a better position to be sold, says Peter Warrian, a senior fellow at the Munk Centre for International Studies at the University of Toronto.

As the Stelco Turns

Known around the world as the steel opera that never ends, the Stelco saga continues to amaze and amuse (but only those far enough away from it to be uninvolved).

Stelco owners show Pratt the door:
Globeadvisor.com
After two tumultuous years running Stelco Inc., Courtney Pratt will soon step down as chief executive officer at the request of the company’s new controlling shareholders.
‘I’ve learned a whole lot,’ Mr. Pratt said yesterday with a chuckle. ‘Because this has, in many ways, been an absolutely unique situation.’
Few would argue with that. Mr. Pratt became Stelco’s CEO on Jan. 1, 2004, with no experience in the steel industry beyond sitting on the company’s board. Three weeks later, Mr. Pratt put Stelco, Canada’s largest steel maker, into bankruptcy protection, citing a $1.25-billion pension shortfall and competitive pressures.

A guy named Bill Cara has written a number of blog articles about the Stelco situation. He claims the whole bankruptcy thing is a fraud to steal from the shareholders … I don’t know enough to evaluate his arguments.
January 05, 2005 Canadian Equities: Stelco at the Eleventh Hour
March 03, 2005 A great day for Stelco
March 31, 2005 Stelco Court Decision
April 11, 2005 Stelco report
May 11, 2005 Stelco joke continues
September 02, 2005 Where are the securities regulators in the Stelco fiasco?
October 25, 2005 A call for integrity and fairness
November 23, 2005 Stelco crooks can now be rounded up

It appears that the Marxist-Leninist Party of Canada agrees with him (and even supplied some of the information for his arguments). Take that for what it’s worth. It all makes great reading.

Meanwhile, the Hamilton Spectator has been reporting that restructuring approval is expected by the end of this week.

Lawyers for the company and its new lenders reached agreement late last night to put new loans ahead of pension obligations in the event of a new restructuring. That cleared the way to finalize the agreements that will let the struggling steelmaker out of bankruptcy protection.

Justice James Farley is now expected to approve the restructuring plan by the end of the week.

Lenders, led by Tricap Management Limited, had been demanding extra security for their loans in the event Stelco buckles again in the steel industry’s next down cycle.

Court postpones bid by Stelco shareholders to examine former director

Wait! Hold the presses! Just when you thought the Stelco thing was finally settling down comes this little nugget (in the middle of a larger report).

cbc.ca

The restructuring plan essentially wipes out the value of Stelco’s current shares. The shareholder group alleges that the forecasts the plan is based on lowball the Hamilton-based steelmaker’s value.



Navigant’s report uses Stelco’s valuation model, but substitutes steel price forecasts consultant received from Metal Bulletin Research. The report concludes that Stelco’s shareholder equity is worth between $1.1 billion and $1.3 billion, which translates into between $10.76 and $12.71 a share.

In court documents prepared for Friday’s hearing, Murray Pollitt, president of Pollitt & Co., alleged that Stelco’s management and board actively undermined Stelco’s shareholder equity through inaccurate information released to its stakeholders.

‘It is my belief that Stelco was cynically using the (creditor protection) process to compromise the legitimate interests of its various stakeholders including its employees and the unions, its retired pensioners, its creditors and, most significantly, its equity holders,’ Pollitt said.

In an affidavit, James May, a consultant with Metal Bulletin, said his base estimate for hot rolled steel coil in 2006 is $525 per ton. Stelco’s forecast was $458 per ton.

The Beginning of the end of the Stelco Soap Opera? Creditors approve Stelco restructuring plan

Creditors approve Stelco restructuring plan

Stelco Inc. Investor Relations

Stelco Inc. announced early this evening that a third amended restructuring plan was approved by affected creditors at the previously-adjourned meeting that resumed today. Affected creditors of certain Stelco subsidiaries also voted to approve the plan at other meetings resumed this afternoon.

At the meeting of affected creditors of Stelco Inc., the plan was approved by 78.4% of those affected creditors who voted in person or by proxy, representing 87.7% of the total value of affected claims that were voted at the meeting.

Courtney Pratt, Stelco President and Chief Executive Officer, said, ‘We truly appreciate the support shown by our creditors today. The approved plan is fair, reasonable and responsible. It balances the competing interests of our stakeholders. And it paves the way for Stelco to emerge from Court protection and to become a viable and competitive steel producer for the long term.