Cleveland-Cliffs Inc. (the “Company”) (NYSE: CLF)
announced today that it has entered into a definitive agreement to
acquire Ferrous Processing and Trading Company, including certain
related entities (“FPT”), for a total enterprise value of
approximately $775 million, on a cash-free, debt-free basis and
subject to customary adjustment (“the FPT Acquisition”). Based in
Detroit, FPT is among the largest processors and distributors of
prime ferrous scrap in the United States, representing
approximately 15% of the domestic merchant prime scrap market. FPT
currently processes approximately three million tons of scrap per
year, approximately half of which is prime grade.
FPT operates 22 scrap processing facilities, with approximately
90% of revenues originating from its Midwest locations, primarily
in Michigan and Ohio. In the trailing twelve months ended August
31, 2021, FPT generated EBITDA of approximately $100 million. FPT
already enjoys an outsized position in automotive and industrial
scrap, which is expected to grow as part of Cleveland-Cliffs. FPT
was Fastmarkets’ 2019 winner of Scrap Company of the Year.
Lourenco Goncalves, Cleveland-Cliffs’ Chairman, President and
CEO said, “Cleveland-Cliffs is entering the scrap business as a
major player through the acquisition of a large scrap company. Even
more importantly, FPT has a very meaningful presence in prime
scrap. With all the new flat-rolled EAF capacity coming online in
our market over the next four years, prime scrap will only become
more and more scarce. As the largest supplier of flat rolled steel
in North America, Cleveland-Cliffs is the main source of the steel
that generates prime scrap in manufacturing facilities.
Furthermore, throughout our entire footprint, Cleveland-Cliffs also
consumes a very significant amount of scrap in our EAFs and BOFs.
The acquisition of FPT will enhance our ability to buy back prime
scrap directly from our clients, cutting the middlemen and
improving the margin contribution from scrap for both
Cleveland-Cliffs and for the manufacturing and service center
clients that will be able to sell scrap directly back to us.”
Transaction rationale:
- Allows Cliffs to optimize productivity at its existing EAFs and
BOFs as the Company has no current plans to add additional
steelmaking capacity
- Expands portfolio of high-quality ferrous raw materials to
include iron ore pellets, direct-reduced iron, and now prime
scrap
- Immediately secures substantial access to prime scrap, where
demand is expected to grow dramatically with limited to no growth
in corresponding supply
- Creates a platform for Cliffs to leverage long-standing
flat-rolled automotive and other customer relationships into
recycling partnerships to grow prime scrap presence
- Furthers commitment to environmentally-friendly, low-carbon
intensity steelmaking with cleaner materials mix
The acquisition has been approved by the board of directors of
Cleveland-Cliffs and is expected to close in the fourth quarter of
2021, subject to the receipt of regulatory approval and the
satisfaction of other customary closing conditions.
Presentation slides related to the FPT acquisition will be
available on the Cliffs’ website. The Company will discuss the
acquisition in further detail on its third-quarter 2021 earnings
conference call on October 22, 2021, at 10:00am ET.
About Cleveland-Cliffs Inc.
Cleveland-Cliffs is the largest flat-rolled steel producer in
North America. Founded in 1847 as a mine operator, Cliffs also is
the largest manufacturer of iron ore pellets in North America. The
Company is vertically integrated from mined raw materials and
direct reduced iron to primary steelmaking and downstream
finishing, stamping, tooling, and tubing. The Company serves a
diverse range of markets due to its comprehensive offering of
flat-rolled steel products and is the largest supplier of steel to
the automotive industry in North America. Headquartered in
Cleveland, Ohio, Cleveland-Cliffs employs approximately 25,000
people across its mining, steel and downstream manufacturing
operations in the United States and Canada. For more information,
visit www.clevelandcliffs.com.
Forward-Looking Statements
This release contains statements that constitute
"forward-looking statements" within the meaning of the federal
securities laws. All statements other than historical facts,
including, without limitation, statements regarding our current
expectations, estimates and projections about our industry or our
businesses, are forward-looking statements. We caution investors
that any forward-looking statements are subject to risks and
uncertainties that may cause actual results and future trends to
differ materially from those matters expressed in or implied by
such forward-looking statements. Investors are cautioned not to
place undue reliance on forward-looking statements. Among the risks
and uncertainties that could cause actual results to differ from
those described in forward-looking statements are the following:
our ability to successfully complete the FPT Acquisition;
disruptions to our operations relating to the COVID-19 pandemic,
including the heightened risk that a significant portion of our
workforce or on-site contractors may suffer illness or otherwise be
unable to perform their ordinary work functions; continued
volatility of steel and iron ore market prices, which directly and
indirectly impact the prices of the products that we sell to our
customers; uncertainties associated with the highly competitive and
cyclical steel industry and our reliance on the demand for steel
from the automotive industry, which has been experiencing a trend
toward light weighting that could result in lower steel volumes
being consumed; potential weaknesses and uncertainties in global
economic conditions, excess global steelmaking capacity, oversupply
of iron ore, prevalence of steel imports and reduced market demand,
including as a result of the COVID-19 pandemic; severe financial
hardship, bankruptcy, temporary or permanent shutdowns or
operational challenges, due to the COVID-19 pandemic or otherwise,
of one or more of our major customers, including customers in the
automotive market, key suppliers or contractors, which, among other
adverse effects, could lead to reduced demand for our products,
increased difficulty collecting receivables, and customers and/or
suppliers asserting force majeure or other reasons for not
performing their contractual obligations to us; our ability to
reduce our indebtedness or return capital to shareholders within
the expected timeframes or at all, depending on market and other
conditions; risks related to U.S. government actions with respect
to Section 232 of the Trade Expansion Act (as amended by the Trade
Act of 1974), the United States-Mexico-Canada Agreement and/or
other trade agreements, tariffs, treaties or policies, as well as
the uncertainty of obtaining and maintaining effective antidumping
and countervailing duty orders to counteract the harmful effects of
unfairly traded imports; impacts of existing and increasing
governmental regulation, including climate change and other
environmental regulation that may be proposed under the Biden
Administration, and related costs and liabilities, including
failure to receive or maintain required operating and environmental
permits, approvals, modifications or other authorizations of, or
from, any governmental or regulatory authority and costs related to
implementing improvements to ensure compliance with regulatory
changes, including potential financial assurance requirements;
potential impacts to the environment or exposure to hazardous
substances resulting from our operations; our ability to maintain
adequate liquidity, our level of indebtedness and the availability
of capital could limit cash flow necessary to fund working capital,
planned capital expenditures, acquisitions, and other general
corporate purposes or ongoing needs of our business; adverse
changes in credit ratings, interest rates, foreign currency rates
and tax laws; limitations on our ability to realize some or all of
our deferred tax assets, including our net operating loss
carryforwards; our ability to realize the anticipated synergies and
benefits of the FPT Acquisition and to successfully integrate the
business of FPT into our existing businesses, including
uncertainties associated with maintaining relationships with
customers, vendors and employees; additional debt we will incur in
connection with the FPT Acquisition, as well as additional debt we
incurred in connection with enhancing our liquidity during the
COVID-19 pandemic, the merger with AK Steel Holding Corporation and
the acquisition of ArcelorMittal USA LLC, may negatively impact our
credit profile and limit our financial flexibility; known and
unknown liabilities we will assume in connection with the FPT
Acquisition; the ability of our customers, joint venture partners
and third-party service providers to meet their obligations to us
on a timely basis or at all; supply chain disruptions or changes in
the cost or quality of energy sources or critical raw materials and
supplies, including iron ore, industrial gases, graphite
electrodes, scrap, chrome, zinc, coke and coal; liabilities and
costs arising in connection with any business decisions to
temporarily idle or permanently close a mine or production
facility, which could adversely impact the carrying value of
associated assets and give rise to impairment charges or closure
and reclamation obligations, as well as uncertainties associated
with restarting any previously idled mine or production facility;
problems or disruptions associated with transporting products to
our customers, moving products internally among our facilities or
suppliers transporting raw materials to us; uncertainties
associated with natural or human-caused disasters, adverse weather
conditions, unanticipated geological conditions, critical equipment
failures, infectious disease outbreaks, tailings dam failures and
other unexpected events; our level of self-insurance and our
ability to obtain sufficient third-party insurance to adequately
cover potential adverse events and business risks; disruptions in,
or failures of, our information technology systems, including those
related to cybersecurity; our ability to successfully identify and
consummate any strategic investments or development projects,
cost-effectively achieve planned production rates or levels, and
diversify our product mix and add new customers; our actual
economic iron ore and coal reserves or reductions in current
mineral estimates, including whether we are able to replace
depleted reserves with additional mineral bodies to support the
long-term viability of our operations; the outcome of any
contractual disputes with our customers, joint venture partners,
lessors, or significant energy, raw material or service providers,
or any other litigation or arbitration; our ability to maintain our
social license to operate with our stakeholders, including by
fostering a strong reputation and consistent operational and safety
track record; our ability to maintain satisfactory labor relations
with unions and employees; availability of workers to fill critical
operational positions and potential labor shortages caused by the
COVID-19 pandemic, as well as our ability to attract, hire, develop
and retain key personnel; unanticipated or higher costs associated
with pension and other postretirement benefit obligations resulting
from changes in the value of plan assets or contribution increases
required for unfunded obligations; and potential significant
deficiencies or material weaknesses in our internal control over
financial reporting. The Company undertakes no obligation to
publicly update forward-looking statements, whether as a result of
new information, future events or otherwise.
For additional factors affecting the business of
Cleveland-Cliffs, refer to Part I – Item 1A. Risk Factors of our
Annual Report on Form 10-K for the year ended December 31, 2020,
and other filings with the SEC.
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version on businesswire.com: https://www.businesswire.com/news/home/20211011005166/en/
MEDIA CONTACT: Patricia Persico Director, Global
Communications (216) 694-5316
INVESTOR CONTACT: James Kerr Manager, Investor Relations
(216) 694-7719
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