Stelco Holdings Inc. Announces Major Share Buyback and Cancellation of Approximately 13% of Its Outstanding Shares

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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 [phone].

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

For investor enquiries: Paul D. Scherzer, Chief Financial Officer, [phone], [email protected]; For media enquiries: Trevor Harris, Vice-President, Corporate Affairs, [phone], [email protected]

Related Links

https://www.stelco.com/