ArcelorMittal unlocks value through separation of integrated US assets and repositions its footprint in North America

Transaction Highlights

Under the terms of the agreement, ArcelorMittal expects to receive an aggregate equity value consideration of $1.4 billion upon closing of the Transaction. Approximately one third of the consideration is in upfront cash ($505 million). The remaining two thirds of the consideration is in the form of equity:

• stock component of approximately 78 million shares of Cleveland-Cliffs common stock with value of $500 million[1]; and
• non-voting preferred stock redeemable for approximately 58 million shares of Cleveland-Cliffs common stock with an aggregate value of $373 million or an equivalent amount in cash[2].

In addition, Cleveland-Cliffs will assume the liabilities of ArcelorMittal USA, including net liabilities of approximately $0.5 billion and pensions and other post-employment benefit liabilities (“OPEB”) which Cleveland-Cliffs values at $1.5 billion[3].

Benefits to ArcelorMittal from the Transaction

Transaction crystallizing compelling value to ArcelorMittal’s shareholders

• Favourable valuation achieved for ArcelorMittal USA due to the high synergistic potential of the combined company. The Transaction valuation for ArcelorMittal USA equates to an enterprise value multiple of approximately 6x through-the-cycle EBITDA[4].
• ArcelorMittal will participate in the upside potential of the larger combined company, which is more diversified, fully-integrated and has significant synergy potential.

Significant value creation potential from exposure to a highly synergetic combination

• The combined company is expected to generate an estimated $150 million of annual cost synergies. ArcelorMittal will participate in the future value creation potential through its minority shareholding.
• Key areas of anticipated synergies include optimising the combined footprint, raw material sourcing and supply chain efficiencies, and integrating corporate functions.

 Strategic repositioning of ArcelorMittal’s North American platform

• This transaction repositions ArcelorMittal’s platform in North America which will continue to service its clients through its strategic assets in Canada, Mexico and AM/NS Calvert in the US.
• These assets represent a strong footprint in North America with Dofasco and ArcelorMittal Mexico amongst the lowest cost producers in the region. AM/NS Calvert, which is already amongst the world’s most advanced steel finishing facilities, will be augmented by the recently announced intention to construct an EAF to optimise its slab sourcing.
• ArcelorMittal will retain its R&D programme and innovation centres to maintain its product and process development that underpins its leadership position.

Positive financial impact on ArcelorMittal enables opportunity for cash returns to shareholders

• The deconsolidation of the associated liabilities at ArcelorMittal USA, comprising mostly pension and OPEB liabilities, will improve the Group’s risk profile, reduce net debt and strengthen its capital structure and credit metrics.
• ArcelorMittal intends to redistribute $500 million of the cash proceeds to shareholders through a share buyback programme.
• The buyback programme will commence with effect from today and comply with purchase price rules as per the Company’s share buyback mandate. Share buybacks may be undertaken until the earlier of 31 March 2021 or when ArcelorMittal has fully utilised the allocated $500 million.

Commenting, Mr. Lakshmi Mittal, Chairman and CEO, ArcelorMittal, said:

“This transaction is a unique opportunity for ArcelorMittal to unlock significant value for shareholders while retaining exposure to the North American economy through our high-quality NAFTA assets alongside a participation in what will be a stronger, better integrated, US business. I would like to thank all employees of ArcelorMittal USA for their hard work in ensuring the business maintained its reputation as a trusted, quality supplier of steels for American manufacturing. I am confident you will have a bright future with Cleveland-Cliffs.”

Mr. Aditya Mittal, President and CFO, ArcelorMittal, said:

“Combining these two companies, which have enjoyed a long and strong supplier/customer relationship, is a unique opportunity to create a competitive and resilient company with considerable synergy potential. As a result, this transaction offers compelling value proposition with further upside potential. The transaction also completes our $2 billion asset portfolio optimisation target and enables us to return cash to shareholders.”