Exclusive: ArcelorMittal in talks to merge U.S. assets with Cleveland-Cliffs

FILE PHOTO: The logo of steel factory ArcelorMittal is pictured in Seraing near the Belgian city of Liege, March 10, 2016. REUTERS/Francois Lenoir

(Reuters) – ArcelorMittal SA MT.LU, the world’s largest steelmaker, is exploring a deal to merge its U.S. operations with Cleveland-Cliffs Inc CLF.N, the largest U.S. producer of iron ore pellets, people familiar with the matter said on Sunday.

The combination would signal a new push among steelmakers to consolidate and diversify their business, making it less vulnerable to swings in demand. It would come after Cleveland-Cliffs acquired AK Steel, a U.S. maker of flat-rolled carbon steels, including stainless steel, for $3 billion, including debt, last March.

The latest deal could result in the merger of U.S. assets of Luxembourg-based ArcelorMittal that are worth between $2 billion and $3 billion with Cleveland-Cliffs, one of the sources said. It would be transformative for Cleveland-Cliffs, which has a market value of $2.3 billion and had total long-term debt as of the end of June of $4.5 billion.

There is no certainty the negotiations will lead to a deal, the sources said. If, however, the talks prove successful, a deal could be announced in the coming days, one of the sources added.

The sources requested anonymity because the matter is confidential. ArcelorMittal and Cleveland-Cliffs did not immediately respond to requests for comment.

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ArcelorMittal’s U.S. business has more than 18,000 employees and 25 facilities, including mines, steelmaking facilities and finishing operations, according to the company’s website. Headquartered in Cleveland, Cleveland-Cliffs employs about 11,000 people across mining and steel manufacturing operations in the United States and Canada.

ArcelorMittal said last year it was aiming to offload $2 billion of assets by the middle of 2021 to reduce its debt. In December, it agreed to sell a 50% stake in its shipping business, and has also sold its stake in Brazilian steelmaker Gerdau.

After it acquired AK Steel, which derived 66% of its revenue in 2019 from the automotive market, Cleveland-Cliffs experienced a drop in demand from its car manufacturing clients, which were forced to temporarily halt production earlier this year because of the COVID-19 pandemic.

Reporting by Greg Roumeliotis in New York; Editing by Peter Cooney

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