Cleveland-Cliffs is about to become the USA’s largest flat-rolled steel producer following the announcement yesterday of a landmark acquisition deal between it and the world’s largest steelmaker, ArcelorMittal.
In a nutshell, Cleveland-Cliffs is to acquire ArcelorMittal USA, one of the largest steelmakers in the USA, for US$1.4 billion, paying US$505 million in cash and the rest in stock. The deal is expected to close by the year end.
The latest Cleveland-Cliffs acquisition follows hot on the heels of its acquisition of AK Steel earlier in the year for US$1.1 billion and was regarded as the company’s first step to becoming ‘fully integrated’.
Lakshmi Mittal, chairman and CEO of ArcelorMittal, described the transaction as a ‘unique opportunity’ to unlock significant value for shareholders and claimed that the business will be stronger and better integrated.
“I would like to thank all employees of ArcelorMittal USA for their hard work in ensuring the business maintained its reputation as a trusted, quality supplier of steels for American manufacturing. I am confident you will have a bright future with Cleveland-Cliffs,” he said.
Aditya Mittal, president and CFO of ArcelorMittal, commented on the ‘long and strong supplier/customer relationship’ between the two businesses and reiterated Lakshmi’s comment that the deal represents ‘a unique opportunity to create a competitive and resilient company with considerable synergy potential’.
“This transaction offers a compelling value proposition with further upside potential,” he said. “The transaction also completes our $2 billion asset portfolio optimisation target and enables us to return cash to shareholders.”
ArcelorMittal believes there is plenty of ‘upside potential’ in the new deal as well as ‘high synergistic potential’ in the combined company.
Cleveland-Cliffs will assume the liabilities of ArcelorMittal USA, including net liabilities of approximately $0.5 billion and pensions and other post-employment benefit liabilities (“OPEB”) which Cleveland-Cliffs values at $1.5 billion.
The combined company is expected to generate an estimated $150 million of annual cost synergies surrounding raw material sourcing and supply chain efficiencies as well as integrating corporate functions.
The deal repositions ArcelorMittal’s platform in North America which, it claims, will continue to service clients through its strategic assets in Canada, Mexico and AM/NS Calvert in the USA.
“These assets represent a strong footprint in North America with Dofasco and ArcelorMittal Mexico amongst the lowest cost producers in the region,” the company claims, adding that AM/NS Calvert – already among the world’s most advanced steel finishing facilities – will be augmented by the recently announced intention to construct an EAF to optimise its slab sourcing.
ArcelorMittal retains its R&D programme and innovation centres to maintain product and process development underpinning its leadership position.
The transaction has received the approval of both ArcelorMittal and Cleveland-Cliffs boards of directors and is expected to close within Q4 2020, subject to receipt of regulatory approvals and satisfaction of other customary closing conditions.