Cleveland-Cliffs Inc.—owner of the United Taconite and Northshore Mining in northern Minnesota—on Tuesday announced plans to merge with Ohio-based AK Steel and its subsidiaries.
Cleveland-Cliffs will acquire all of the issued and outstanding shares of AK Steel common stock for about $1.1 billion. Lourenco Goncalves — Cleveland-Cliffs’ current chairman, president and CEO – will lead the company, while Roger Newport will retire from his role as AK Steel’s CEO.
The move is aimed at creating an integrated producer of both iron ore and steel products.
“We expect to realize immediate growth and a long-desired objective of a more diverse customer base, as well as more predictable cash flow generation due to the contracted nature of AK Steel’s sales of high-end automotive steel,” Goncalves said.
Cleveland-Cliffs employs nearly 1,800 workers across its three mining operations in Minnesota, according to the company's website.
Cleveland-Cliffs officials expect to cut annual expenses by about $120 million within the first year of the deal closing. The company will continue to be listed on the NYSE with its headquarters in Cleveland.
The transaction is expected to close in the first half of 2020.
AK Steel, which will retain its branding and corporate identity as a subsidiary of Cleveland-Cliffs, produces flat-rolled carbon, stainless, and electrical steel products. The company sells its products to the automotive and manufacturing industries, as well as distributors and converters.
Cleveland-Cliffs supplies iron ore pellets to the North American steel industry from its mines and pellet plants in Minnesota and Michigan.
The merged companies say they’ll have a presence throughout the manufacturing process, including mining, pelletizing, and steel products development and production.
Cleveland-Cliffs officials hope the merger will make the companies’ performance more consistent.