Ashland steel plant could startup again after $1 billion merger

Ashland steel plant could startup again after $1 billion merger

Ashland steel plant could startup again after $1 billion merger

Cleveland-Cliffs is buying AK Steel in a stock deal valued at about $1.1 billion. AK Steel CEO Roger Newport will retire.

"By combining the best-in-class quality of AK Steel's assets and its enviable product mix with Cliffs' debt profile and proven management team, we are creating a premier North American company, self-sufficient in iron ore pellets and geared toward high value-added steel products", Lourenco Goncalves, Cliffs' chairman, president and CEO, said in a statement.

Leaders of the two companies touted the merger as an opportunity to create a vertically integrated steel company that will provide greater value to shareholders.

With the purchase, Cliffs, which owns United Taconite, Northshore Mining and part of Hibbing Taconite on Minnesota's Iron Range, will combine its key mining and iron pelletizing businesses in Minnesota and MI with AK Steel's skills in making carbon and stainless steel tubing products, hot and cold-stamped components, and die design and tooling products.

"For Cliffs, 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. Cliffs, as the company is known, will pay each AK Steel shareholder 0.4 shares of Cliffs stock for each share of AK steel they own. That could indicate lack of faith that the deal will be acceptable to Cliffs shareholders, including three investment firms that together own more than 30% of the company: BlackRock (about 15%), Vanguard (over 10%) and State Street (just over 5%).

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WSAZ reports the merger could create work at the idle AK Steel plant in Ashland.

Cleveland-Cliffs' history dates back to 1847. Cliffs will remain listed on the New York Stock Exchange. The company supplies iron ore pellets to the North American steel industry from its mines and pellet plants in MI and Minnesota. Next year Cliffs is set to complete its new $700 million hot-briquetted iron plant in Toledo, Ohio.

The transaction is expected to close in the first half of 2020 and is subject to approval by shareholders of both companies and other customary closing conditions.

Shares of Cleveland-Cliffs dropped 12%, while AK Steel's stock gained 4.5%.

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