Cleveland-Cliffs buying ArcelorMittal USA in major steel merger

DULUTH – Cleveland-Cliffs is buying ArcelorMittal USA for $1.4 billion in a major steel industry merger that will see Cliffs become the country's largest flat-rolled steel producer.

"We can now fully optimize our position as an important player in the American market," Cliffs CEO Lourenco Goncalves said in a call with investors Monday morning. "We cannot wait to unlock the untapped potential of what we should accomplish with the shared technical expertise among an incredible workforce of over 25,000 combined people."

The companies had combined shipments of 17 million tons of steel in 2019.

Included in the purchase are control over two Iron Range taconite mines and processing plants, Minorca and HibTac. The move would make Ohio-based Cliffs — which also owns Northshore Mining and United Taconite in Minnesota and the Tilden Mine in Michigan — the largest iron ore producer in the country, with 28 million long tons of annual capacity.

"It brings me great pride to grow our longstanding iron ore mining and pelletizing business portfolio," Goncalves said.

Cliffs and U.S. Steel will be the only companies operating the six Iron Range taconite mines when the deal is closed.

U.S. Steel operates the largest of the mines — Minntac — and Keetac, which remains indefinitely idled due to the pandemic. U.S. Steel will also keep a 14.7% stake in HibTac.

There were about 4,100 people employed by taconite producers last year, according to county records. Most of the 1,750 mine employees laid off due to the COVID-19 impact on steel demand this summer have been called back to work.

Six steel mills, eight finishing plants and three coal and cokemaking facilities will also come under Cliffs' control as part of its purchase.

"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, appliance, infrastructure, machinery and equipment," Goncalves said in a statement.

ArcelorMittal, based in Luxembourg, is the largest steelmaker in the world but has taken a major financial hit due to the pandemic's effect on the global economy. The company said Monday it will use proceeds from the sale for a $500 million share buyback program.

"This transaction is a unique opportunity for ArcelorMittal to unlock significant value for shareholders while retaining exposure to the North American economy," CEO Lakshmi Mittal said in a statement. The company will retain its 50% stake in a steel processing plant in Alabama in addition to Canadian and Mexican facilities.

Cliffs will pay $505 million in cash and the rest in stock for the transaction, which is expected to close by the end of the year.

Cliffs purchased AK Steel earlier this year for $1.1 billion, a first step toward the company becoming "fully integrated."

"With our acquisition of ArcelorMittal USA ... Cleveland-Cliffs will complete the second step of its transformation into a fully integrated, high-value steel enterprise," Goncalves said.

Cliffs had about $2 billion in revenue in 2019, while ArcelorMittal USA reported $9.9 billion.

Both companies saw their stock prices rise more than 10% in early trading Monday, though they have not recovered from a pandemic-induced drop earlier this year.

Brooks Johnson • 218-491-6496