Luxembourg-based ArcelorMittal says it has entered into a definitive agreement with Cleveland-based Cleveland-Cliffs Inc. for that firm to acquire “100 percent of the shares of ArcelorMittal USA for a combination of cash and stock.”
The assets being sold do not include ArcelorMittal mills in Canada or Mexico or the electric arc furnace (EAF) mill being constructed in Alabama. It does include large basic oxygen furnace (BOF) integrated mills in Cleveland and in Burns Harbor and East Chicago, Indiana, and a small BOF complex in Riverdale, Illinois. Cleveland-Cliffs also will acquire EAF facilities in Coatesville and Steelton, Pennsylvania.
Cleveland-Cliffs, which has its roots in the supply of iron ore and steelmaking ingredients, leapt into the steelmaking sector earlier this year with the purchase of AK Steel. In addition to the melting capacity being acquired from ArcelorMittal, Cleveland-Cliffs also will take possession of metallics production and downstream facilities in Indiana, Minnesota, Ohio, Pennsylvania and West Virginia.
“This transaction is a unique opportunity for ArcelorMittal to unlock significant value for shareholders while retaining exposure to the North American economy through our high-quality assets alongside a participation in what will be a stronger, better integrated United States business,” states Aditya Mittal, president and CFO of ArcelorMittal.
Continues Mittal, “Combining these two companies, which have enjoyed a long and strong supplier/customer relationship, is a unique opportunity to create a competitive and resilient company with considerable synergy potential. As a result, this transaction offers compelling value proposition with further upside potential. The transaction also completes our $2 billion asset portfolio optimization target and enables us to return cash to shareholders.”
Under the terms of the agreement, Cleveland-Cliffs will assume the liabilities of ArcelorMittal USA, including net liabilities of approximately $500 million and pensions and other postemployment benefit liabilities that Cleveland-Cliffs values at $1.5 billion, according to ArcelorMittal.
ArcelorMittal refers to the newly combined company created by the addition of its former assets with those of AK Steel as “more diversified, fully integrated and [having] significant synergy potential.”
Remarks Lourenco Goncalves, chairman, president and CEO of Cleveland-Cliffs, “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 U.S. assets.”
Adds Goncalves, “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.”