Cleveland-Cliffs to acquire ArcelorMittal USA for $1.4B in cash, stock
Cleveland-Cliffs (CLF) announced that it has entered into a definitive agreement with ArcelorMittal (MT), pursuant to which Cleveland-Cliffs will acquire substantially all of the operations of ArcelorMittal USA and its subsidiaries for approximately $1.4B.
Upon closure of the transaction, Cleveland-Cliffs will be the largest flat-rolled steel producer in North America, with combined shipments of approximately 17M net tons in 2019.
The company will also be the largest iron ore pellet producer in North America, with 28M long tons of annual capacity.
ArcelorMittal USA will be acquired by Cleveland-Cliffs on a cash-free and debt-free basis, with a combination of 78.2M shares of Cleveland-Cliffs common stock, non-voting preferred stock with an approximate aggregate value of $373M and $505M in cash.
The enterprise value of the transaction is approximately $3.3B, which takes into consideration the assumption by Cleveland-Cliffs of pension/OPEB liabilities and working capital.
In 2018 and 2019, ArcelorMittal USA averaged annual revenues of approximately $10.4B and annual adjusted EBITDA of approximately $700M.
The assets acquired include s steelmaking facilities, eight finishing facilities, two iron ore mining and pelletizing operations, and three coal and coke making operations.
The transaction is anticipated to be EPS accretive, and Cleveland-Cliffs expects the acquisition to reduce the company’s leverage from 4.3x to 3.6x on a pro-forma 2019 adjusted EBITDA basis, including the expectation of approximately $150M in estimated annual cost savings.
The acquisition is also expected to increase the company’s liquidity substantially due to an increased ABL borrowing base.
The facilities included in the transaction are: Steelmaking: Indiana Harbor, Burns Harbor, Cleveland Coatesville, Steelton, Riverdale. Finishing: Columbus , Conshohocken, Double G. Coatings JV, Gary Plate, I/N Tek JV with Nippon Steel, I/N Kote JV with Nippon Steel and Weirton. Mining and Pelletizing: Hibbing JV and Minorca. Met Coal / Cokemaking: Monessen, Princeton and Warren.
The transaction has been approved by the board of directors of both companies and is expected to close in Q4, subject to the receipt of regulatory approval and the satisfaction of other customary closing conditions.
The cash consideration from Cleveland-Cliffs is expected to be financed using available cash on hand and liquidity. Cleveland-Cliffs has received commitments to increase its existing asset based lending facility.
MT last traded at $13.36, CLF last changed hands at $6.47.
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