Daily Local News (West Chester, PA)
Steel plants to be sold to Ohio- based company
Cleveland- Cliffs will acquire ArcelorMittal USA for $ 1.4 billion
CLEVELAND, OHIO » ClevelandCliffs Inc., an Ohio- based producer of iron ore and steel, has entered into a definitive agreement with ArcelorMittal S. A., to acquire substantially all of the operations of ArcelorMittal USA LLC and its subsidiaries for approximately $ 1.4 billion in a combination of cash and stock.
Included in the deal are Arcelor Mittal’s Coatesville and Conshohocken facilities. In total, Cleveland- Cliffs will acquire 19 properties: six steelmaking facilities, eight finishing facilities, two iron oremining and pelletizing operations andthree coal operations in the U. S. ArcelorMittal will retain its operations in Canada and Mexico.
Once the transaction closes, Cleveland- Cliffs will be the largest flat- rolled steel producer in North America, as well as the largest iron ore pellet producer in North America, according to a press release.
“This is the first day of a great chapter in the history of ClevelandCliffs,” Lourenco Goncalves, chairman of the board, president and CEO of ClevelandCliffs, said during a conference callMonday with investors. Goncalves will lead the expanded organization. “We believe we are sitting on a platform that will be
the benchmark on how to produce steel and how to produce steel in the most environmentally friendly way with the most socially responsible support from the community, employees and the collection of stakeholders surrounding our company.”
In 2018 and 2019, ArcelorMittal USA averaged annual revenues of approximately $ 10.4 billion. Under the terms of the agreement, ArcelorMittalwill receive approximately $ 505million in cash, 78.2 million shares of Cleveland- Cliffs common stockwith value of $ 500 million; and non- voting preferred stockwith an approximate aggregate value of $ 373 million
In addition, 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 which Cleveland- Cliffs values at $ 1.5 billion.
The transaction has been approved by the board of directors of both companies and is expected to close in the fourth quarter of 2020.
“Steelmaking is a business where production volume, operational diversification, dilution of fixed costs, and technical expertisematter above all else, and this transaction achieves all of these. ArcelorMittal is a worldclass organization that we have
long admired as our customer and our partner, and we know for a fact that they have taken good care of their U. S. assets,” Goncalves said in a statement.
The Coatesville facility is the former Lukens Steel Co., and is a steel plate production facility that produces steel fromscrap in an electric arc furnace and is capable of producing 900,000 tons of raw steel each year. The facility employs 638 and serves the aircraft and aerospace, construction, distribution, energy, heavy equipment, military, mild and tool and shipbuilding industries.
Lukens Steel Co. was sold to Bethlehem Steel in 1997, which
was then bought by International Steel Group Inc. in 2003. One year later, that company was acquired by Mittal Steel. In 2006 Mittal Steel and Arcelor merged, and the name has remained the same since.
The Conshohocken facility is a steel plate finishing facility that operates heat treat, finishing and inspection facilities for steel plate finishing. The facility employs 126 and serves the construction, distribution, heavy equipment, military, mold and tool industries.
In 2019, Cleveland- Cliffs acquired AK Steel, a leading producer of flat- rolled carbon, stainless and electrical steel products. Goncalves said the acquisition of ArcelorMittal USA will complete the second step “of this transition into a fully integrated high- value steel enterprise.”
The company expects to realize approximately $ 150 million in estimated annual cost savings.
“Combining the ArcelorMittal USA franchise with our business and the AK Steel footprint, takes us where we need to be in this competitive and qualityfocused marketplace,” Goncalves added.
According to Lakshmi Mittal, chairman and CEO, ArcelorMittal, the transaction is an opportunity for ArcelorMittal to unlock value for shareholders while retaining exposure to the North American economy through “our high- quality NAFTA assets alongside a participation in what will be a stronger, better integrated, U. S. business.”
“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 ClevelandCliffs,” he said in a statement.
“We look forward to welcoming the ArcelorMittal USA team into our organization. We are creating an exceptional company, based on great people and supported by our existing strong relationship with the United Steelworkers, the United Auto Workers and the Machinists unions,” Goncalves said.