Steel Giant ArcelorMittal to Sell U.S. Business to Cleveland-Cliffs--Update
By Alistair MacDonald
ArcelorMittal SA has agreed to sell its U.S. business to
Cleveland-Cliffs Inc. for around $1.4 billion, a deal that will
further diminish its position as the world's largest steelmaker as
it grapples with the fallout from the coronavirus pandemic.
The Luxembourg-based company said Monday that about one-third of
the deal value will be paid in cash upfront, with the rest paid in
stock. ArcelorMittal said it would use the proceeds to pay down
debt and hand $500 million of the proceeds back to investors in
The company's shares jumped 10% in morning trading but are still
down about 28% so far this year as the global economy suffers from
the spread of Covid-19 and resulting lockdowns.
ArcelorMittal was America's second-largest steelmaker, producing
12.9 million metric tons of the metal in the U.S. last year,
accounting for 14% of the company's global production. The company
is shedding mines and steelmaking facilities in the U.S. that had
generated revenues of $9.9 billion last year and will leave it with
only one significant asset in America -- a steel finishing plant in
Calvert, Alabama that it owns with Nippon Steel Corp.
"The deal repositions our North American platform, unlocks value
for our shareholders and strengthens our balance sheet," said
Lakshmi Mittal, ArcelorMittal's chairman and chief executive.
The company became the world's largest steelmaker by production
after two decades of aggressive deal making across the globe but
its hold on the position is slipping. Even before Monday's deal,
China Baowu Steel Group Corp. had been expected to take the top
spot this year after combining with other domestic steelmakers,
cementing China's dominance in the industry.
Steel making has been hit hard by the spread of coronavirus,
particularly in ArcelorMittal's largest market of Europe.
Production in Europe's biggest economies was down by double digits
in August compared with the year before, including a 31.2% decline
in France, according to the World Steel Association. Production in
the U.S. also dropped, falling 24.4% in the month.
Meanwhile, Chinese production rose 8.4% in the period, allowing
its steelmakers to increase the proportion of the world's steel
being made in their mills.
Despite selling the majority of its U.S. operations,
ArcelorMittal said it would still be able to service clients in
North America through its operations in Canada and Mexico. It also
said it stood to benefit in the region from the minority
shareholding it was receiving in Cleveland-Cliffs. It expects the
combined entity to generate around $150 million of annual cost
Under Monday's deal, Cleveland-Cliffs is also set to assume
liabilities from ArcelorMittal USA valued at a combined $2 billion.
ArcelorMittal said that would allow it to reduce its net debt,
which stands at about $7.8 billion.
The transaction is expected to close within the fourth quarter
of 2020, subject to regulatory approvals and customary closing
--Giulia Petroni contributed to this article.
Write to Alistair MacDonald at email@example.com
(END) Dow Jones Newswires
September 28, 2020 10:18 ET (14:18 GMT)
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