Cleveland Cliffs Inc. to Buy U.S. Assets of ArcelorMittal for $1.4B in Cash and Shares

One of the biggest deals announced this week is that of Cleveland-Cliffs Inc. announcing it will purchase the U.S. assets of ArcelorMittal SA for around $1.4 billion.

The largest U.S. producer of iron ore pellets will be paying in cash and shares to purchase the assets from the world’s largest steelmaker. ArcelorMittal will receive $505 million upfront in cash and the remaining roughly two-thirds in the form of equity.

The deal, which was announced by the two companies on Monday, will turn Cleveland-Cliffs into the largest flat-rolled steel producer in North America.

ArcelorMittal’s U.S. business has more than 18,000 employees and 25 facilities, including mines, steel-making facilities and finishing operations. They produced 12.9 million tonnes of steel last year.

It was over the weekend that Reuters reported that ArcelorMittal was in talks to merge its U.S. operations with Cleveland-Cliffs, which bought U.S. steel producer AK Steel for $3 billion in March.

The equity arrangement will give ArcelorMittal an initial stake of 16% in Cleveland-Cliffs, which could rise to 25.5%.

The deal will also include $2 billion of liabilities, including linked to pensions, putting the overall deal value at $3.4 billion.

ArcelorMittal said it would continue to serve the North American market through operations in Canada and Mexico.

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.”

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.