Iron-ore mining company Cleveland-Cliffs (NYSE:CLF) took another step in transforming itself into a fully integrated steelmaker with the announcement that it is acquiring the U.S. operations of global steel giant ArcelorMittal (NYSE:AM). In December 2019, Cleveland-Cliffs announced it was purchasing integrated U.S. 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 for ArcelorMittal, including $505 million in cash, and will incur pension and other post-employment benefit liabilities, bringing the total deal value to about $3.3 billion.
Cleveland-Cliffs said it expects the combination to be immediately accretive to earnings per share. Since most of the purchase value will be with stock, and because of the substantial increase in its asset base, it will also improve its liquidity position when considering the larger asset-based borrowing ability.
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 will return $500 million of cash proceeds from the deal to shareholders through a previously authorized share-buyback program.
The companies believe there will be $150 million in annual cost synergies from the deal through the combined operations, as well as raw material and supply chain opportunities.
The assets acquired include six steel mills; eight finishing facilities; and several iron-ore, coal, and cokemaking operations used for steelmaking raw materials.