/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED
STATES/
LG Bedrock agrees to sell approximately 11.4 million common
shares to the Company
HAMILTON, ON, Aug. 13, 2021 /CNW/ - Stelco Holdings Inc.
("Stelco Holdings" or the "Company"), (TSX: STLC), a
low cost, integrated and independent steelmaker with one of the
newest and most technologically advanced integrated steelmaking
facilities in North America, today
announced that it has entered into an agreement to repurchase for
cancellation 11,398,024 common shares in the capital of the Company
(the "Share Repurchase Transaction") from LG Bedrock
Holdings LP ("LG Bedrock" or the "Selling
Shareholder") at a price of $34.93 per common share (representing a discount
of approximately 26% to the closing price of the Company's common
shares on August 12, 2021), for gross
proceeds to the Selling Shareholder of approximately $398 million. As a result of the Share Repurchase
Transaction, the Selling Shareholder's ownership in the Company
will be reduced from 19,052,235 common shares to 7,654,211 of the
issued and outstanding common shares (representing a decrease from
approximately 21.5% to approximately 9.9% of the issued and
outstanding common shares after giving effect to the Share
Repurchase Transaction).
Closing of the Share Repurchase Transaction is expected to occur
by August 16, 2021. The Company will
fund the Share Repurchase Transaction with cash on hand and remains
well positioned to continue funding its ongoing strategic capital
initiatives using operating cash flows.
"This is an exceptional opportunity to take full advantage of
the strength we have built in our business over the past four
years," said Alan Kestenbaum,
Executive Chairman and Chief Executive Officer. "Our commitment to
and focus on maintaining a strong balance sheet combined with our
ability to capitalize on our strategic investments, the strong
steel market and our strong and strengthening cash flow generation
has positioned us to take advantage of opportunities such as this
one as we begin to allocate our capital in a manner that is highly
accretive to all of our shareholders."
"Stelco has been served well over the past four years by having
affiliates of Lindsay Goldberg as a
major shareholder, and we look forward to continuing to provide
them and all of our shareholders with excellent returns in the
future," continued Kestenbaum.
Transaction Highlights
The Company believes that the Share Repurchase Transaction
provides a number of benefits to its shareholders, including:
- Improved Market Liquidity and Capital Markets
Profile. The Share Repurchase Transaction will
reduce the Company's outstanding share count by approximately 13%
without reducing any of the shares currently in the public float
and available to investors, ensuring the same level of liquidity on
a share count basis while significantly increasing the percentage
of shares held by the public. Furthermore, the Share Repurchase
Transaction is expected to eliminate the perceived overhang of the
Selling Shareholder's stock in the market. The Company expects that
over time this transaction will result in a more diversified
shareholder base and improved liquidity in its stock.
- Compelling Use of Capital. The Company believes that the
Share Repurchase Transaction represents a compelling opportunity to
deploy cash generated from operations at a significant discount to
our market price. The Company believes that the Share Repurchase
Transaction will have a meaningfully positive impact on Stelco's
per share financial metrics.
Share Repurchase Transaction Details and Special Committee
Review Process
The Share Repurchase Transaction will be completed pursuant to a
definitive share purchase agreement entered into today between the
Company and the Selling Shareholder. LG Bedrock has also agreed in
the definitive share purchase agreement to a customary lock-up in
respect of its remaining common shares for a period of 12 months,
subject to certain limited exceptions.
The Share Repurchase Transaction was overseen by a Special
Committee of the Board of Directors of the Company comprised of
independent directors Michael
Mueller (Chair), Monty Baker,
Heather Ross (Lead Director) and
Daryl Wilson (the "Special
Committee"). The Special Committee undertook a deliberate and
full consideration of the Share Repurchase Transaction and various
alternatives related thereto. RBC Capital Markets, the Special
Committee's financial advisor, provided an opinion to the Special
Committee and the Board stating that, subject to the assumptions,
limitations and qualifications to be set out in the fairness
opinion, as of August 12, 2021, the
consideration to be paid under the Share Repurchase Transaction is
fair, from a financial point of view, to the Company.
Upon the recommendation of the Special Committee that, among
other things, the Share Repurchase Transaction is in the best
interests of the Company, the Board of Directors (other than
interested directors who abstained from voting) unanimously
approved the Share Repurchase Transaction.
As a result of LG Bedrock's holdings decreasing to below 10% of
the issued and outstanding common shares, LG Bedrock will cease to
have any nomination rights or preemptive rights pursuant to the
investor rights agreement between, among others, the Company and LG
Bedrock. However, each of LG Bedrock's current representatives on
the Board of Directors will continue to serve as directors of the
Company, subject to the Board of Directors' ordinary course
director assessment and succession processes.
McCarthy Tétrault served as legal advisor to the Company,
Stikeman Elliott served as independent legal advisor to the Special
Committee, and Blake, Cassels & Graydon served as legal advisor
to the Selling Shareholder.
Stated Capital Increase
In addition, the stated capital account in respect of the
Company's common shares has been increased by the amount of
approximately $995 million.
About Stelco
Stelco is a low cost, integrated and independent steelmaker with
one of the newest and most technologically advanced integrated
steelmaking facilities in North America. Stelco produces
flat-rolled value-added steels, including premium-quality coated,
cold-rolled and hot-rolled steel products. With first-rate gauge,
crown, and shape control, as well as reliable uniformity of
mechanical properties, our steel products are supplied to customers
in the construction, automotive and energy industries
across Canada and the United States as well as
to a variety of steel services centres, which are regional
distributors of steel products.
About the Selling Shareholder
The Selling Shareholder is a limited partnership organized under
the laws of the State of Delaware
and the address of its registered office in the State of Delaware is 1209 Orange Street,
Wilmington, DE 19801, United States. The Common Shares are being
disposed of by the Selling Shareholder as a result of investment
considerations including price, market conditions, availability of
funds, evaluation of alternative investments and other factors.
An early warning report relating to the transaction
contemplated hereby will be filed by the Selling Shareholder in
accordance with applicable securities laws and will be available on
SEDAR under Stelco's profile at www.sedar.com or may be obtained
directly from James C. Pickel, Jr.
upon request at (212) 651-1148.
Forward-Looking Information
This release contains "forward-looking information" within the
meaning of applicable securities laws. Forward-looking information
may relate to our future outlook and anticipated events or results
and may include information regarding our financial position,
business strategy, growth strategy, acquisition, opportunities,
budgets, operations, financial results, taxes, dividend policy,
plans and objectives of our Company. Particularly, information
regarding our expectations of future results, performance,
achievements, prospects or opportunities is forward-looking
information. In some cases, forward-looking information can be
identified by the use of forward-looking terminology such as
"plans", "targets", "expects" or "does not expect", "is expected",
"an opportunity exists", "budget", "scheduled", "estimates",
"outlook", "forecasts", "projection", "prospects", "strategy",
"intends", "anticipates", "does not anticipate", "believes", or
variations of such words and phrases or state that certain actions,
events or results "may", "could", "would", "might", "will", "will
be taken", "occur" or "be achieved". In addition, any statements
that refer to expectations, intentions, projections or other
characterizations of future events or circumstances may be forward
looking statements. Forward-looking statements are not historical
facts but instead represent management's expectations, estimates
and projections regarding future events or circumstances.
Forward-looking information in this news release includes: the
expected closing date and benefits of the Share Repurchase
Transaction; the expectations related to the Company's ability to
continue funding its ongoing strategic capital initiatives using
operating cash flows; the expectation that the Company will
allocate its capital in a manner accretive to shareholders; the
Company's expectations regarding returns that it will deliver to
shareholders in the future; the expectations related to elimination
of the perceived overhang of the Selling Shareholder's stock in the
market; increased diversification of the Company's shareholder base
and improved liquidity in its stock; statements regarding the
completion of the Share Repurchase Transaction; and expectations
regarding the composition of the Board of Directors.
Undue reliance should not be placed on forward-looking
information. The forward-looking information in this press release
is based on our opinions, estimates and assumptions in light of our
experience and perception of historical trends, current conditions
and expected future developments, as well as other factors that we
currently believe are appropriate and reasonable in the
circumstances. Despite a careful process to prepare and review the
forward-looking information, there can be no assurance that the
underlying opinions, estimates and assumptions will prove to be
correct. These forward-looking statements are subject to risks
and uncertainties that could cause the outcome to differ materially
from current expectations. Such risks and uncertainties include,
among others, the market impact of the announcement of the Share
Repurchase Transaction, including on the Company's relationships,
operating results and business generally; significant transaction
costs or unknown liabilities; and other customary risks associated
with transactions of this nature.
Any forward-looking statement speaks only as of the date on
which it is made, and, except as required by law, the Company does
not undertake any obligation to update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise. New factors emerge from time to time,
and it is not possible for the Company to predict all such factors.
When considering these forward-looking statements, you should keep
in mind the risk factors and other cautionary statements described
in the Company's management's discussion and analysis for the year
ended December 31, 2020 and referred
to under the heading "Risk Factors" in the Company's Annual
Information Form dated February 17,
2021 and available on SEDAR at www.sedar.com. The
forward-looking statements contained in this release are made as of
the date hereof.
SOURCE Stelco