AK Steel announced today it has entered an acquisition agreement with Cleveland-based Cleveland-Cliffs Inc. estimated to be worth about $3 billion.
According to a company statement, AK Steel plans to retain its branding and corporate identity following the merger, becoming a wholly owned subsidiary of Cliffs. Meanwhile, Cliffs will maintain a presence at AK Steel’s headquarters office in West Chester, Ohio along with its Research and Innovation Center in Middletown, Ohio.
AK Steel CEO Roger Newport plans to retire as CEO and a director of AK Steel upon completion of the deal, and the newly merged companies would be led by Cliffs chairman, president and CEO Lourenco Goncalves. Additionally, three AK Steel board members will join the combined board as two Cliffs members exit.
Under the agreement, AK Steel shareholders would receive 0.4 shares of Cliffs common stock for each share that they own, which would result in Cliffs shareholders owning 68 percent of the combined company and AK Steel shareholders owning 32 percent.
“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,” Goncalves said in a statement.
Goncalves also mentioned the possibility of reopening AK Steel’s recently shuttered Ashland Works plant that resulted in the layoff of 260 employees, noting that the plant could be used to produce merchant pig iron, “an opportunity neither company could pursue on a standalone basis.”
Both boards have already approved the plan, and the deal is expected to close in the first half of 2020 following approval by both companies’ shareholders and regulatory bodies.