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May 21, 2019

Stelco has ‘whole bunch’ of M&A targets as steel tariffs end, executive chairman says

Stelco executive chairman: End of metal tariffs could lead to more M&A in steel sector


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The executive chairman of Stelco Holdings Inc. (STLC.TO) says the company is eyeing multiple M&A possibilities now that steel tariffs have been lifted.

“We have our eyes set on a whole bunch of potential targets that we’re looking at and we have phenomenal opportunities,” Alan Kestenbaum told BNN Bloomberg’s Amber Kanwar Tuesday.

“We are uniquely positioned because of our capital structure and our balance sheet.”

Kestenbaum’s comments come on the first full day that Canadian metals producers are operating without 25-per-cent duties that the Trump administration had imposed under Section 232 of the Trade Expansion Act of 1962.

In a joint statement Friday, President Donald Trump said the U.S. would lift steel and aluminum tariffs on Canada and Mexico that were imposed almost a year ago, while Canada said it will lift retaliatory duties on U.S. products as part of the deal. The move is expected to pave the way for the new North American Free Trade Agreement to be ratified.  

“The best day was when I closed on this facility and bought it in the middle of 2017, and this was the second because it really just changed the profile of the company,” Kestenbaum said.

While steel companies like Stelco are breathing a huge sigh of relief as the levies end, Kestenbaum said the Hamilton, Ont.-based plant had “incredible performance” during the tariff period.

“We did this because we have a specific model that we keep our debt to nothing – we have a lot of cash,” Kestenbaum said, noting Stelco paid out $300 million in dividends while the tariffs were imposed.

“What I’m really proud of is keeping jobs, no layoffs, and having our shareholders seeing a tremendous benefit too,” he added.     

Shares of Stelco surged 11.5 per cent Friday on the tariff news, and were trading almost six per cent higher Tuesday morning.