Cleveland-Cliffs continues steel consolidation with purchase of ArcelorMittal
Iron ore mining company Cleveland cliffs (NYSE: CLF) has taken another step forward in its transformation into a fully integrated steelmaker by announcing that it is acquire US operations of the global steel giant ArcelorMittal (NYSE: AM). In December 2019, Cleveland-Cliffs announced the acquisition of integrated US steel producer AK Steel.
Today’s announcement makes Cleveland-Cliffs the largest producer of flat-rolled steel in North America. The company will pay $ 1.4 billion to ArcelorMittal, including $ 505 million in cash, and commit to pension and other post-employment benefits, bringing the total value of the transaction to approximately $ 3.3 billion of dollars.
Cleveland-Cliffs said it expects the combination to be immediately accretive to earnings per share. As most of the purchase value will be in equities and due to the substantial increase in its asset base, it will also improve its liquidity position given its greater borrowing capacity. .
The equity portion of the purchase means that ArcelorMittal will continue to have an interest in the performance of the assets. It will also retain its other North American assets in Mexico, Canada, as well as a joint venture with Nippon steel in Calvert, Alabama. ArcelorMittal said it would return $ 500 million in cash proceeds from the transaction to shareholders through a previously authorized share buyback program.
The companies believe there will be $ 150 million in annual cost synergies from the deal across the combined operations, as well as raw materials and supply chain opportunities.
The assets acquired include six steel mills; eight finishing facilities; and several manufacturing operations of iron ore, coal and coke used for the manufacture of steel raw materials.
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