Cleveland-Cliffs Inc. (NYSE: CLF) announced that it has entered
into a definitive agreement with ArcelorMittal S.A. (NYSE: MT),
pursuant to which Cleveland-Cliffs will acquire substantially all
of the operations of ArcelorMittal USA LLC and its subsidiaries
(“ArcelorMittal USA”) for approximately $1.4 billion. Upon closure
of the transaction, Cleveland-Cliffs will be the largest
flat-rolled steel producer in North America, with combined
shipments of approximately 17 million net tons in 2019. The company
will also be the largest iron ore pellet producer in North America,
with 28 million long tons of annual capacity.
ArcelorMittal USA will be acquired by Cleveland-Cliffs on a
cash-free and debt-free basis, with a combination of 78.2 million
shares of Cleveland-Cliffs common stock, non-voting preferred stock
with an approximate aggregate value of $373 million, and $505
million in cash. The enterprise value of the transaction is
approximately $3.3 billion, which takes into consideration the
assumption by Cleveland-Cliffs of pension/OPEB liabilities and
working capital.
In 2018 and 2019, ArcelorMittal USA averaged annual revenues of
approximately $10.4 billion and annual adjusted EBITDA of
approximately $700 million. The assets acquired include 6
steelmaking facilities, 8 finishing facilities, 2 iron ore mining
and pelletizing operations, and 3 coal and cokemaking
operations.
The transaction is anticipated to be EPS accretive, and
Cleveland-Cliffs expects the acquisition to reduce the Company’s
leverage from 4.3x to 3.6x on a pro-forma 2019 adjusted EBITDA
basis, including the expectation of approximately $150 million in
estimated annual cost savings. The acquisition is also expected to
increase the Company’s liquidity substantially due to an increased
ABL borrowing base.
Lourenco Goncalves, Chairman of the Board, President and CEO of
Cleveland-Cliffs, will lead the expanded organization. Mr.
Goncalves stated: “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.”
Mr. Goncalves continued, “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.”
Transaction Rationale
- Combined innovation capabilities with world-class expertise in
iron ore pellets, HBI and steel
- Furthers commitment to environmentally and socially conscious
steelmaking with self-sufficiency in HBI and pellets
- Improves operational capabilities, flexibility, and steelmaking
cost performance
- Asset locations consistent with Cleveland-Cliffs’
long-standing, U.S.-centric strategy
- Increased exposure to highly desirable automotive end
market
- Fully-integrated system delivers improved through-the-cycle
margins
- Deleveraging transaction creates a more resilient, pro-forma
balance sheet
- Highly synergistic transaction with clear line of sight to
achievement of approximately $150 million of estimated annual cost
savings
- Substantial asset base increases liquidity and secured
borrowing availability
- Enhances optionality for future production of merchant pig
iron
Assets Acquired
The facilities included in the transaction are:
- Steelmaking:
- Indiana Harbor
- Burns Harbor
- Cleveland
- Coatesville
- Steelton
- Riverdale
- Finishing:
- Columbus
- Conshohocken
- Double G. Coatings JV (ArcelorMittal USA’s 50% interest)
- Gary Plate
- I/N Tek JV with Nippon Steel (ArcelorMittal USA’s 60%
interest)
- I/N Kote JV with Nippon Steel (ArcelorMittal USA’s 50%
interest)
- Piedmont
- Weirton
- Mining and Pelletizing:
- Hibbing JV (ArcelorMittal USA’s 62.3% interest)
- Minorca
- Met Coal / Cokemaking:
- Monessen
- Princeton
- Warren
Additional Details
The transaction has been approved by the board of directors of
both companies and is expected to close in the fourth quarter of
2020, subject to the receipt of regulatory approval and the
satisfaction of other customary closing conditions.
The cash consideration from Cleveland-Cliffs is expected to be
financed using available cash on hand and liquidity.
Cleveland-Cliffs has received commitments to increase its existing
Asset Based Lending Facility. Upon close of the transaction,
ArcelorMittal USA inventories and accounts receivable are expected
to further increase the Company’s pro forma combined borrowing
base, enhancing availability and overall liquidity.
Advisors and Counsel Goldman Sachs & Co. LLC is
acting as financial advisor to Cleveland-Cliffs and Jones Day is
serving as legal counsel. BofA Securities is acting as financial
advisor to ArcelorMittal S.A. and Cleary Gottlieb Steen &
Hamilton LLP is serving as legal counsel.
Conference Call & Webcast Information
Cleveland-Cliffs will conduct a live conference call and webcast on
September 28 at 8:30 a.m. Eastern Time. The call will be broadcast
live and archived on Cliffs' website at www.clevelandcliffs.com.
Presentation slides will also be available on the Cliffs’
website.
About Cleveland-Cliffs Inc. Founded in 1847,
Cleveland-Cliffs is among the largest vertically integrated
producers of differentiated iron ore and steel in North America.
With an emphasis on non-commoditized products, the Company is
uniquely positioned to supply both customized iron ore pellets and
steel solutions to a quality-focused customer base. AK Steel, a
wholly-owned subsidiary of Cleveland-Cliffs, is a leading producer
of flat-rolled carbon, stainless and electrical steel products. The
AK Tube and Precision Partners businesses provide customer
solutions with carbon and stainless steel tubing products, die
design and tooling, and hot- and cold-stamped components. In 2020,
Cliffs also expects to be the sole producer of hot briquetted iron
(HBI) in the Great Lakes region. Headquartered in Cleveland, Ohio,
Cleveland-Cliffs employs approximately 11,000 people across mining
and steel manufacturing operations in the United States and Canada.
For more information, visit www.clevelandcliffs.com or
www.aksteel.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
This communication contains “forward-looking statements” within
the meaning of the federal securities laws, including Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
In this context, forward-looking statements often address expected
future business and financial performance and financial condition,
and often contain words such as “expect,” “anticipate,” “intend,”
“plan,” “believe,” “estimate,” “would,” “target” and similar
expressions, as well as variations or negatives of these words.
Forward-looking statements by their nature address matters that
are, to different degrees, uncertain, such as statements about the
consummation of the proposed transaction and the anticipated
benefits thereof. These and other forward-looking statements
reflect the Company’s current beliefs and judgments and are not
guarantees of future results or outcomes. Forward-looking
statements are based on assumptions and estimates that are
inherently affected by economic, competitive, regulatory, and
operational risks and uncertainties and contingencies that may be
beyond the Company’s control. They are also subject to inherent
risks and uncertainties that could cause actual results or
performance to differ materially from those expressed in any
forward-looking statements. Important risk factors that may cause
such a difference include (i) the completion of the proposed
transaction on the anticipated terms and timing or at all,
including the receipt of regulatory approvals and anticipated tax
treatment, (ii) potential unforeseen liabilities, future capital
expenditures, revenues, expenses, earnings, economic performance,
indebtedness, financial condition, losses and future prospects,
(iii) the ability of the Company to integrate its and ArcelorMittal
USA’s businesses successfully and to achieve anticipated synergies,
(iv) business and management strategies for the management,
expansion and growth of the combined company’s operations following
the consummation of the proposed transaction, (v) potential
litigation relating to the proposed transaction that could be
instituted against the Company or its officers and directors, (vi)
the risk that disruptions from the proposed transaction will harm
ArcelorMittal USA’s or the Company’s businesses, including current
plans and operations, (vii) the ability of ArcelorMittal USA or the
Company to retain and hire key personnel, (viii) potential adverse
reactions or changes to business relationships resulting from the
announcement or completion of the proposed transaction, (ix) severe
financial hardship, bankruptcy, temporary or permanent shutdowns or
operational challenges, due to the ongoing COVID-19 pandemic or
otherwise, of one or more of the Company’s major customers,
including customers in the automotive market, key suppliers or
contractors, which, among other adverse effects, could lead to
reduced demand for the Company’s products, increased difficulty
collecting receivables, and customers and/or suppliers asserting
force majeure or other reasons for not performing their contractual
obligations to the Company, (x) the Company’s ability to realize
the anticipated benefits of the acquisition of AK Steel and to
successfully integrate the businesses of AK Steel into its existing
businesses, including uncertainties associated with maintaining
relationships with customers, vendors and employees, as well as
realizing additional future synergies, (xi) uncertainty as to the
long-term value of the Company’s common stock, (xii) continued
availability of capital and financing and rating agency actions,
(xiii) legislative, regulatory and economic developments and (xiv)
unpredictability and severity of catastrophic events, including
acts of terrorism or outbreak of war or hostilities, as well as
management’s response to any of the aforementioned factors. Other
factors that may present significant additional obstacles to the
realization of forward-looking statements or which could have a
material adverse effect on the Company’s consolidated financial
condition, results of operations, credit rating or liquidity are
contained in the Company’s periodic reports filed with the
Securities and Exchange Commission, including in the Company’s
Quarterly Report on Form 10-Q for the quarterly period ended March
31, 2020. The Company assumes no obligation to publicly provide
revisions or updates to any forward-looking statements, whether as
a result of new information, future developments or otherwise,
should circumstances change, except as otherwise required by
applicable law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200927005083/en/
Cleveland-Cliffs Investor Relations: Paul Finan Director,
Investor Relations (216) 694-6544
Media: Patricia Persico Director, Corporate Communications (216)
650-0168
Cleveland Cliffs (NYSE:CLF)
Historical Stock Chart
From Aug 2024 to Sep 2024
Cleveland Cliffs (NYSE:CLF)
Historical Stock Chart
From Sep 2023 to Sep 2024