Market Overview

Cleveland-Cliffs To Buy ArcelorMittal's US Unit For $1.4B

Cleveland-Cliffs To Buy ArcelorMittal's US Unit For $1.4B

Cleveland-Cliffs Inc (NYSE: CLF) announced Monday it has signed an agreement to purchase the United States unit of ArcelorMittal S.A. (NYSE: MT).

What Happened: The $1.4 billion transaction would be made on a cash-free and debt-free basis with 78.2 million shares of the Cleveland-Cliffs common stock — worth about $460 million as of Friday’s closing. Additionally, it would involve the transfer of non-voting preferred Cleveland-Cliffs stock worth approximately $373 million and $505 million in cash, Cleveland-Cliffs said in a statement. 

The company expects cost savings to the tune of $150 million annually after the transaction is completed.

Goldman Sachs Group Inc’s (NYSE: GS) investment arm is acting as financial advisor to Cleveland-Cliffs, while BofA Securities, the investment banking arm of Bank of America Corporation (NYSE: BAC), to ArcelorMittal. 

The deal is expected to close in the fourth quarter of 2020, subject to regulatory approval. 

Why It Matters: Post-transaction, Cleveland-Cliff would become the largest flat-rolled steel producer in North America with combined shipments of 17 million net tons in 2019, according to the company.

ArcelorMittal was looking to offload $2 billion of assets by the middle of 2021 to reduce its debt and agreed to sell a 50% stake in its shipping business in December, Reuters reported.

The Luxembourg-based steel maker has also sold its stake in Brazillian steelmaker Gerdau S.A. (NYSE: GGB).

Price Action: Cleveland-Cliffs shares closed nearly 3% higher at $5.88 on Friday. On the same day, ArcelorMittal shares closed almost 0.3% lower at $12.09 and fell almost 1.5% in the after-hours session.

Photo by Borvan53 on Wikimedia


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