By Pietro Lombardi

 

Shares in ArcelorMittal jumped at opening on Monday after the company reached an agreement with Cleveland-Cliffs Inc. to sell most of its U.S. assets for around $1.4 billion, with its shareholders set to get part of the proceeds through a buyback.

Under the terms of the cash-and-stock deal, the Luxembourg-based steel-and-mining company will get roughly a third of the agreed amount, or $505 million, in cash upfront. The remaining will be paid in Cleveland-Cliffs stock.

Most of the cash proceeds will go to ArcelorMittal shareholders via a buyback of $500 million, which the company launched on Monday.

ArcelorMittal shares rose 9.2% at 0811 GMT.

"The transaction represents a significant repositioning of ArcelorMittal's North American Free Trade Agreement footprint," Jefferies said.

After the divestment, the company's operations in the region will consist of its assets in Canada and Mexico, plus a joint venture in the U.S., controlling a plant in Alabama.

The sale of ArcelorMittal USA will help the group cut debts and reinforce its capital structure and credit metrics, as well as improve its risk profile, ArcelorMittal said.

The business, whose facilities include mines and steelmaking plants, had revenue of $9.9 billion last year.

The U.S. steel-and-mining company will assume the liabilities of the acquired business, including those related to pensions and other post-employment benefits, which it values at around $1.5 billion. All considered, the deal has an enterprise value of roughly $3.3 billion.

The company emerging from the deal, in which ArcelorMittal will have a minority stake, is expected to achieve annual cost synergies of about $150 million. Cleveland-Cliffs' Chief Executive Lourenco Goncalves will lead the company.

"Steelmaking is a business where production volume, operational diversification, dilution of fixed costs, and technical expertise matter above all else, and this transaction achieves all of these," Mr. Goncalves said.

The sale, which is subject to regulatory approval, should close in the last quarter of the year.

 

Write to Pietro Lombardi at pietro.lombardi@dowjones.com; @pietrolombard10

 

(END) Dow Jones Newswires

September 28, 2020 04:40 ET (08:40 GMT)

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