Cleveland-Cliffs, the manufacturer of iron ore pellets, said on Tuesday it had reached an agreement to buy AK Steel, an American manufacturer of flat-rolled carbon, stainless steel and electrical products, for $ 1.1 billion.
Under the terms of the agreement, AK Steel shareholders will receive Cleveland-Cliffs shares in the ratio of 0.4 per share of AK Steel at a rate of $ 3.36 per share.
Cleveland-Cliffs shares ended the trading day on Monday with a 5.19% increase to $ 8.41, while AK Steel shares closed on Monday with a 4.52% increase to $ 2.89 per share.
After the transaction, Cleveland-Cliffs shareholders will own approximately 68%, and AK Steel shareholders will own approximately 32% of the combined company. Cliffs CEO Lorenko Gonçalves will lead the combined company, and AK Steel CEO Roger Newport will step down.
It is expected that the transaction will be completed in the first half of 2020, subject to the approval by the shareholders of both companies, as well as the approval of regulatory authorities and other typical closing conditions.
As part of the agreement, Cliffs said it received a loan of about $ 2 billion from Credit Suisse in connection with a new loan secured by assets and refinancing of AK Steel's priority secured bonds for 2023.
AK Steel is a leading manufacturer in the United States of flat products from carbon, stainless and electrical steel, as well as from carbon and stainless pipe products, primarily for the automotive industry, infrastructure, power generation and distribution.
