Cleveland-Cliffs to Buy ArcelorMittal, Stock Rises

On Sept. 28, Cleveland-Cliffs agreed to buy the U.S. operations of ArcelorMittal for about $1.4 billion. Upon completion of the cash-and-stock deal, Cleveland-Cliffs will become the biggest flat-rolled steel producer in North America. Reuters reported on Sept. 27, citing sources familiar with the matter, that ArcelorMittal was in discussions to merge its U.S. operations with Cleveland-Cliffs.

Cleveland-Cliffs has entered into a definitive agreement to acquire ArcelorMittal's U.S. assets for $1.4 billion. Cleveland will acquire ArcelorMittal on a cash- and debt-free basis. ArcelorMittal will get $505 million upfront in cash and about two-thirds of the balance in equity. The enterprise value of the deal is $3.3 billion, which includes the assumption by Cleveland of pension and other post-employment benefit liabilities. The deal is set to close in the fourth quarter of 2020, subject to regulatory approval and other customary closing conditions.

According to Reuters, “ArcelorMittal said it had now passed its target of offloading $2 billion of assets to reduce its debt, allowing it to carry out a $500 million share buy-back.” ArcelorMittal is the world’s largest steelmaker, while Cleveland-Cliffs is the largest U.S. producer of iron ore pellets. In March, Cleveland-Cliffs acquired U.S. steel producer AK Steel for about $3 billion.

ArcelorMittal stock was up about 8.4 percent at $13.10 in premarket trading today as of this article's writing. The stock fell 0.3 percent on Sept. 25 and closed at $12.09 with a market capitalization of $13.2 billion. ArcelorMittal stock has fallen by 4.5 percent in the last five days and 15.1 percent in the last year.

ArcelorMittal stock is trading 36 percent below its 52-week high of $18.89 and 82.1 percent above its 52-week low of $6.64. Year-to-date, the stock had fallen by 31.1 percent as of Sept. 25. 

Cleveland-Cliffs stock was up about 10.5 percent at $6.50 in premarket trading today. The stock rose 3 percent on Sept. 25 and closed at $5.88 with a market capitalization of $2.3 billion. Cleveland stock has fallen by 5 percent in the last five days and 18.6 percent in the last year.

Cleveland stock is trading 34.8 percent below its 52-week high of $9.02 and 123.6 percent above its 52-week low of $2.63. Year-to-date, the stock had fallen by 30 percent as of Sept. 25. 

CLF stock has fallen as the company’s sales and profitability have declined significantly in 2020 amid the coronavirus pandemic. Lower demand has impacted global iron ore prices, dragging down the company’s price realization for its products.

Currently, analysts' stock price forecast for ArcelorMittal is $17.38, which suggests a 43.8 percent upside. The highest target price of $21.22 implies a 75.5 percent upside, and the lowest target price of $15 suggests a 24.1 percent upside. Among the six Wall Street analysts tracking ArcelorMittal, four recommend "buy," one recommends "hold," and one recommends "sell."