Cleveland-Cliffs Inc has announced that it has entered into a definitive agreement with ArcelorMittal SA, pursuant to which Cleveland-Cliffs will acquire substantially all of the operations of ArcelorMittal USA LLC and its subsidiaries for approximately $1.4 billion. The assets acquired include six steelmaking facilities, eight finishing facilities, two iron ore mining and pelletising operations & three coal and cokemaking operations.
ArcelorMittal USA has two taconite iron ore operations in the Mesabi Iron Range of Minnesota: ArcelorMittal Minorca near Virginia & Hibbing Taconite Company in Hibbing, which is a joint venture between ArcelorMittal, Cleveland-Cliffs and US Steel. ArcelorMittal assumed the managing partner role of Hibbing Taconite in August 2019. Minorca produces about 2.8 Mt of fluxed iron-bearing pellets and mines about 18 Mt of iron ore, rock, and waste material annually. The pellets are shipped to ArcelorMittal Indiana Harbor located in East Chicago, Indiana. Minorca supplies about 50% of No 7 blast furnace’s pelletised iron requirements. Hibbing Taconite produces around 8 Mt/y of iron ore for 5 Mt/y of pellets. The ArcelorMittal Burns Harbor facility receives 100% of its pellet supply from Hibbing, with 1 t of pellets used for every ton of iron and slabs produced. Burns Harbor uses about 5.4 Mt of pellets for its iron producing operations each year.
Coal-wise the deal includes ArcelorMittal Princeton, a coal mine in Princeton, West Virginia, that specialises in surface and underground mining of coal to produce coke and pulverised coal injection (PCI). The majority of the production is consumedat ArcelorMittal facilities. ArcelorMittal took ownership of the Princeton mine on January 1, 2009. It is a 12,000 square foot facility with an annual production capacity of 5 Mt. Princeton primarily serves coke facilities, steel mills and utility markets.
Upon closure of the transaction, Cleveland-Cliffs will be the largest flat-rolled steel producer in North America, with combined shipments of approximately 17 million net tons in 2019. The company will also be the largest iron ore pellet producer in North America, with 28 million 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 78.2 million shares of Cleveland-Cliffs common stock, non-voting preferred stock with an approximate aggregate value of $373 million, and $505 million in cash. The enterprise value of the transaction is approximately $3.3 billion, which takes into consideration the assumption by Cleveland-Cliffs of pension/OPEB liabilities and working capital. The transaction includes the expectation of approximately $150 million in estimated annual cost savings.
Lourenco Goncalves, Chairman of the Board, President and CEO of Cleveland-Cliffs, will lead the expanded organisation. Goncalves stated: “Steelmaking is a business where production volume, operational diversification, dilution of fixed costs, and technical expertise matter above all else, and this transaction achieves all of these. ArcelorMittal is a world class organisation 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 US assets.”
Goncalves continued, “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. The acquisition of ArcelorMittal USA amplifies our position in the discerning automotive steel marketplace, and further improves our position in important US markets such as construction, appliances, infrastructure, machinery and equipment. It also adds to our strong legacy raw material profile and growing finishing capabilities. The transaction will enable us to become a more efficient fully-integrated steel system, with the ability to realise all of our operational and financial goals.”