Cleveland-Cliffs Inc. announced today that it has entered into a definitive agreement with ArcelorMittal USA to acquire substantially all of its operations for $1.4 billion. The transaction will make Cleveland-Cliffs, already a leading producer of electrical steel for motors and transformers, the largest flat-rolled steel producer in North America.
“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,” said Lourenco Goncalves, chairman of the board, president and CEO of Cleveland-Cliffs.
“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.”
The deal represents combined shipments of approximately 17 million net tons in 2019. Cleveland-Cliffs will also be the largest iron ore pellet producer in North America, with 28 million long tons of annual capacity. In March, it acquired AK Steel for about $3 billion which now operates as a subsidiary and remains a key producer of electrical steel in North America and which also has global operations.
In 2018 and 2019, ArcelorMittal USA averaged annual revenues of approximately $10.4 billion and $700 million in earnings. The assets to be acquired include 6 steelmaking facilities, 8 finishing facilities, 2 iron ore mining and pelletizing operations, and 3 coal and coke making operations.
ArcellorMittal, headquartered in the UK, characterizes the deal as a strategic repositioning of its footprint in North America. About one-third of the transaction, $505 million, will be cash and two-thirds of it paid as non-voting equity in Cleveland-Cliffs, making ArcelorMittal a significant minority shareholder. ArcelorMittal will participate in the upside potential of the larger combined company, which is more diversified, fully integrated and has significant synergy potential, it stated. It will continue with certain operations in Canada, Mexico and AM/NS Calvert steel finishing facilities in the US. The company plans to retain its research and development program and innovation centers.