Cleveland-Cliffs (CLF) - Get Cleveland-Cliffs Inc Report has reached an agreement to buy the U.S. operations of Luxembourg-based steel-and-mining company ArcelorMittal (MT) - Get ArcelorMittal SA ADR Report for $1.4 billion in cash and stock.
The transaction would make Ohio-based Cleveland-Cliffs the top flat-rolled steel maker in North America, with combined shipments of about 17 million net tons in 2019, and also the largest iron ore pellet producer.
ArcelorMittal is the world's largest steelmaker.
The deal is anticipated to be accretive to earnings per share and would save the combined company about $150 million in annual costs.
“Steelmaking is a business where production volume, operational diversification, dilution of fixed costs, and technical expertise matter above all else,” said Cleveland-Cliffs Chairman and CEO Lourenco Goncalves in a statement. “This transaction achieves all of these.”
“The acquisition of ArcelorMittal USA amplifies our position in the discerning automotive steel marketplace, and further improves our position in important U.S. markets such as construction, appliances, infrastructure, machinery and equipment,” Goncalves added. “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 realize all of our operational and financial goals.”
Under the deal, which is expected to close during the fourth quarter, Cleveland-Cliffs will pay nearly $900 million in stock and about $500 million in cash. The enterprise value of the transaction is about $3.3 billion.
Cleveland-Cliffs shares were rising 10.46% to $6.50 in trading Monday. American depositary receipts of ArcelorMittal jumped 10.34% on Monday to $13.34.