Cleveland-Cliffs to Buy ArcelorMittal USA for $1.4 Billion, , on September 28, 2020 at 7:41 am

By ILP
On 09/28/2020
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(Bloomberg) — Cleveland-Cliffs Inc. will buy the U.S. operations of ArcelorMittal SA for $1.4 billion in cash and shares to become the biggest flat-rolled steel producer in North America.Ohio-based Cleveland-Cliffs expects its second major deal in less than a year to boost sales to the key automotive market. Earlier this year, the global steel industry saw its biggest slump in production in a decade as demand from key consumers, including automakers, was hit hard by coronavirus lockdowns. The transaction will save the combined entity about $150 million in annual costs.“Steelmaking is a business where production volume, operational diversification, dilution of fixed costs, and technical expertise matter above all else,” Cleveland-Cliffs Chairman Lourenco Goncalves said in a statement. “This transaction achieves all of these.”Cleveland-Cliffs will pay about $873 million of common and non-voting preferred stock, and $505 million in cash, according to the statement. The deal comes as U.S. steel prices recover, driven by tightening supply after lockdowns hurt demand.Read more: Steel Price Hikes Signal More Supply Squeeze than Demand SurgeIn March, Cleveland-Cliffs acquired AK Steel, an automotive and industrial-parts maker valued at $3 billion. The miner finished the deal after raising $725 million in a junk-bond sale.ArcelorMittal plans to use $500 million of the cash proceeds to repurchase shares, starting immediately, the company said in a separate statement. In July the company was considering “structural changes” to the business as it adjusts to the effect of the coronavirus pandemic on global steel demand. The company suspended dividend payments earlier in the year and had previously set a target of about $2 billion in asset sales to help reduce debt.ArcelorMittal rose as much as 8.2%, the most in more than three months. The shares have dropped 30% this year, cutting its market value to 12 billion euros ($14 billion).While top producer China was quick to rebound, ArcelorMittal said in July that a recovery in the global market was not without risks. Steel demand — a barometer of the global economy — could take more than a year to fully recover even with massive stimulus measures worldwide.The sale will improve ArcelorMittal’s risk profile and reduce net debt as Cleveland-Cliffs will assume the liabilities of ArcelorMittal USA, including net liabilities of approximately $500 million and pensions and other post-employment benefit liabilities. The enterprise value of the deal is about $3.3 billion, Cleveland-Cliffs said.Read More: ArcelorMittal Sees Signs of Virus Low Point as Lockdowns EaseArcelorMittal, which is based in Luxembourg, generated revenue of $18.6 billion from the North American region last year, accounting for about a quarter of its sales. The assets being acquired include six steelmaking facilities, eight finishing facilities, two iron ore mining and pelletizing operations, and three coal and coke-making operations.Reuters first reported on a potential deal Sunday.Cleveland-Cliffs shares have declined 30% this year, leaving it with a market value of $2.35 billion.(Updates with ArcelorMittal shares in seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.,

Cleveland-Cliffs to Buy ArcelorMittal USA for $1.4 Billion(Bloomberg) — Cleveland-Cliffs Inc. will buy the U.S. operations of ArcelorMittal SA for $1.4 billion in cash and shares to become the biggest flat-rolled steel producer in North America.Ohio-based Cleveland-Cliffs expects its second major deal in less than a year to boost sales to the key automotive market. Earlier this year, the global steel industry saw its biggest slump in production in a decade as demand from key consumers, including automakers, was hit hard by coronavirus lockdowns. The transaction will save the combined entity about $150 million in annual costs.“Steelmaking is a business where production volume, operational diversification, dilution of fixed costs, and technical expertise matter above all else,” Cleveland-Cliffs Chairman Lourenco Goncalves said in a statement. “This transaction achieves all of these.”Cleveland-Cliffs will pay about $873 million of common and non-voting preferred stock, and $505 million in cash, according to the statement. The deal comes as U.S. steel prices recover, driven by tightening supply after lockdowns hurt demand.Read more: Steel Price Hikes Signal More Supply Squeeze than Demand SurgeIn March, Cleveland-Cliffs acquired AK Steel, an automotive and industrial-parts maker valued at $3 billion. The miner finished the deal after raising $725 million in a junk-bond sale.ArcelorMittal plans to use $500 million of the cash proceeds to repurchase shares, starting immediately, the company said in a separate statement. In July the company was considering “structural changes” to the business as it adjusts to the effect of the coronavirus pandemic on global steel demand. The company suspended dividend payments earlier in the year and had previously set a target of about $2 billion in asset sales to help reduce debt.ArcelorMittal rose as much as 8.2%, the most in more than three months. The shares have dropped 30% this year, cutting its market value to 12 billion euros ($14 billion).While top producer China was quick to rebound, ArcelorMittal said in July that a recovery in the global market was not without risks. Steel demand — a barometer of the global economy — could take more than a year to fully recover even with massive stimulus measures worldwide.The sale will improve ArcelorMittal’s risk profile and reduce net debt as Cleveland-Cliffs will assume the liabilities of ArcelorMittal USA, including net liabilities of approximately $500 million and pensions and other post-employment benefit liabilities. The enterprise value of the deal is about $3.3 billion, Cleveland-Cliffs said.Read More: ArcelorMittal Sees Signs of Virus Low Point as Lockdowns EaseArcelorMittal, which is based in Luxembourg, generated revenue of $18.6 billion from the North American region last year, accounting for about a quarter of its sales. The assets being acquired include six steelmaking facilities, eight finishing facilities, two iron ore mining and pelletizing operations, and three coal and coke-making operations.Reuters first reported on a potential deal Sunday.Cleveland-Cliffs shares have declined 30% this year, leaving it with a market value of $2.35 billion.(Updates with ArcelorMittal shares in seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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