Cleveland-Cliffs Reaches Agreement With ArcelorMittal USA For USD 1.4 Billion

ArcelorMittal

Cleveland-Cliffs Inc. has reached an agreement with ArcelorMittal to buy its US assets for USD 1.4 billion in cash and shares. The deal also includes ArcelorMittal’s Indiana steel mills in Northwest. With this deal, Ohio -based iron ore and steel company will become North America’s biggest flat-rolled steel producer. The deal with Luxembourg-based multinational steel giant is expected to be closed in less than a year and will definitely boost its sales to the vital automotive market. This deal comes close on the heels of the company increasing its size with the buying of AK Steel for USD 1.1 billion. Lourenco Goncalves, Chief Executive Officer of Cliffs, said that it will be a benchmark in terms of producing steel. “With this, we definitely become an important player in the US market,” he said.

The deal is crucial as it comes at a time when the global steel industry witnessed the biggest slump in its production in a decade. This is because the demand from key manufacturers was hit hard by global coronavirus lockdowns. Even before the pandemic hit, the steel sector had struggled for several years with excess production capacity. The deal will help ArcelorMittal reduce its debt. USD 500 million of the cash proceeds will be used by the company to repurchase shares. ArcelorMittal has estimated assets of worth USD 2 to 3 billion. It has more than 18,000 people across 15 states of the United States.

Under the deal, Cleveland-Cliffs will pay USD 505 million in cash and about USD 873 million of non-voting preferred and common stock for ArcelorMittal USA. The deal comes as steel prices in the United States recover, driven by tightening supply after coronavirus-induced lockdowns hurt demand. Earlier in July, ArcelorMittal had said that it was considering ‘structural changes’ to the business in order to adjust to the effect of the global pandemic on the demand for steel. It had earlier set a target to sell assets of around USD 2 billion to help reduce debt.