Cleveland-Cliffs Buying ArcelorMittal USA In Estimated $3.3 Billion Deal

By Annie Baker ● September 29, 2020
  • Cleveland-Cliffs Inc (NYSE: CLF) announced this week that it is buying the U.S. operations of ArcelorMittal (NYSE:AM) in a deal valued at about $3.3 billion

Iron ore and steel production company Cleveland-Cliffs Inc (NYSE: CLF) announced this week that it is buying the U.S. operations of ArcelorMittal (NYSE:AM) in a deal valued at about $3.3 billion. Through this deal, Cleveland-Cliffs is becoming the largest producer of flat-rolled steel in North America with combined shipments of approximately 17 million net tons in 2019. And the company will also be the largest iron ore pellet producer in North America with 28 million long tons of annual capacity.

The terms of the deal are that Cleveland-Cliffs is going to pay $1.4 billion for ArcelorMittal, which includes $505 million in cash. And Cleveland-Cliffs is also incurring pension and other post-employment benefit liabilities. This brings the total deal value to about $3.3 billion.

The combination of the companies are expected to be immediately accretive to earnings per share. ArcelorMittal is going to continue having an interest in the performance of assets. And it will also retain certain assets in North America, including a joint venture with Nippon Steel in Calvert, Alabama. ArcelorMittal is going to return $500 million of cash proceeds from the deal to shareholders as part of an authorized share-buyback program.

In a statement, the companies said that there is expected to be $150 million in annual cost savings along with potential raw material and supply chain synergies. As part of the deal, the assets acquired include 6 steelmaking facilities, 8 finishing facilities, 2 iron ore mining and pelletizing operations, and 3 coal and cokemaking operations.

The headquarters of ArcelorMittal is in Luxembourg and the revenue from its North American operations generated was $18.6 billion last year. Earlier this year, Cleveland-Cliffs also acquired a company called AK Steel in a deal valued at $3 billion.

KEY QUOTES:

“Steelmaking is a business where production volume, operational diversification, dilution of fixed costs, and technical expertise matter above all else, and this transaction achieves all of these. ArcelorMittal is a world-class organization that we have long admired as our customer and our partner, and we know for a fact that they have taken good care of their US assets.”

“We look forward to welcoming the ArcelorMittal USA team into our organization. We are creating an exceptional company, based on great people and supported by our existing strong relationship with the United Steelworkers, the United Auto Workers and the Machinists unions. The acquisition of ArcelorMittal USA amplifies our position in the discerning automotive steel marketplace, and further improves our position in important U.S. markets such as construction, appliances, infrastructure, machinery and equipment. It also adds to our strong legacy raw material profile and growing finishing capabilities. The transaction will enable us to become a more efficient fully-integrated steel system, with the ability to realize all of our operational and financial goals.”

— Lourenco Goncalves, Chairman of the Board, President and CEO of Cleveland-Cliffs — who will lead the expanded organization