Cleveland-Cliffs Inc.
CLF
inked a definitive agreement with ArcelorMittal
MT
to acquire all of the operations of ArcelorMittal USA LLC along with its subsidiaries for around $1.4 billion. The deal has been approved by the board of directors of the companies and is expected to close in fourth-quarter 2020, which is subject to customary closing conditions.
Post the closure of this transaction, Cleveland-Cliffs will become the largest flat-rolled steel producer in North America. The company will also be North America’s biggest iron ore pellet producer having annual capacity of 28 million long tons. Further, the synergistic transaction is expected to achieve around $150 million of estimated annual cost savings.
Following this announcement, Cleveland-Cliffs shares rose 11.6% and closed the session at $6.56 on Sep 28.
Cleveland-Cliffs will purchase ArcelorMittal USA on a cash-free and debt-free basis through a combination of $505 million in cash, 78.2 million shares of Cleveland-Cliffs common stock and non-voting preferred stock worth around $373 million. Further, the enterprise value of the deal is around $3.3 billion. Averaged annual revenues generated by ArcelorMittal USA in 2018 and 2019 was roughly $10.4 billion with annual adjusted EBITDA of around $700 million.
Cleveland-Cliffs is acquiring ArcelorMittal USA’s eight finishing facilities, six steelmaking facilities, three coal and coke-making operations as well as two iron ore mining and pelletizing operations.
Cleveland-Cliffs expects to finance the cash consideration of the deal using available cash in hand and liquidity. The company has received commitments to expand its existing Asset Based Lending Facility. Upon transaction closure, inventories and accounts receivable of ArcelorMittal USA are expected to boost Cleveland-Cliffs’ pro-forma combined borrowing base and enhance liquidity.
Cleveland-Cliffs’ shares have lost 9.2% in the past year against the
industry
’s 16.8% rise.
Zacks Rank & Other Key Picks
Cleveland-Cliffs currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the basic materials space are Brenntag AG
BNTGY
and Yamana Gold Inc.
AUY
, both carrying a Zacks Rank #2. You can see
the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here
.
Brenntag has an expected earnings growth rate of 2.9% for 2020. The company’s shares have surged 34% in the past year.
Yamana has an expected earnings growth rate of 84.6% for 2020. The company’s shares have gained 78.1% in the past year.
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