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

Cleveland-Cliffs Inc CLF announced Monday it has signed an agreement to purchase the United States unit of ArcelorMittal S.A. 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 GS investment arm is acting as financial advisor to Cleveland-Cliffs, while BofA Securities, the investment banking arm of Bank of America Corporation 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. 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.

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