Turnaround specialist takes 100-year-old Stelco public

Months after emerging from protection

It is not often you see a Canadian-based steel company mulling over an initial public offering, and certainly not one that had emerged out of creditor protection three months ago.

“It is safe to say never,” according to Peter Warrian, senior research fellow at the University of Toronto’s Munk School of Global Affairs and a top academic expert on the Canadian steel industry. “The last time there was a new steel company was about 1956 (the Lake Ontario Steel Company Ltd., or LASCO) and the IPO mechanism as we know it did not exist.”

And yet Hamilton-based Stelco Holdings Inc. filed a preliminary prospectus for a potential IPO Wednesday, the latest twist for steel company that’s more than 100 years old and has entered and emerged from creditor protection twice this century, before officially being taken over by U.S.-based private equity firm Bedrock Industries at the end of June.

“I’m not aware of anyone who’s tried that game recently,” said Marvin Ryder, professor at McMaster University’s DeGroote School of Business, referring to Stelco’s plan to go public just three months after emerging from creditor protection.

The company’s return to the market is being led by Alan Kestenbaum, chairman and chief executive of Bedrock, who apparently enjoys a Warren Buffet-like reputation in some circles.

“They have quite a history of turning around distressed companies and making them successful,” Ryder said of Bedrock. “You can imagine that if Warren Buffett suddenly took a company and said ‘I want to make it public,’ there’d be people buying in, not because they cared about what the company made, but because, ‘hey, that’s Warren Buffett, I want to get on to one of his deals.’”

Bedrock describes itself as a “privately funded company after the sale. The prospectus said that Bedrock “is not selling any Common Shares that it holds in the Offering.”

It’s been a long journey for Stelco, a firm that took its first trip into creditor protection in 2004. The company emerged out of it in 2006 and was bought the following year for US$1.1 billion by United States Steel Corp., which renamed it U.S. Steel Canada.

In 2014, U.S. Steel Canada re-entered creditor protection, citing operating losses of about $3 billion over five years, as well as more than $1