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Cleveland mining company Cleveland-Cliffs taking over AK Steel

Cincinnati Enquirer logo Cincinnati Enquirer 12/3/2019 Alexander Coolidge, Cincinnati Enquirer
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Iron ore mining company Cleveland-Cliffs has agreed to take over West Chester-based AK Steel in a $3 billion deal announced Tuesday.

Shareholders will get 0.4 shares of Cleveland-Cliffs stock for each share of AK Steel and the Cleveland company will assume AK Steel's $2.4 billion in debt. The deal is expected to close in the first half of 2020.

a green and white street sign sitting on the grass: A shipments entrance to AK Steel on Wicoff Street in Middletown, Ohio, on Monday, March 5, 2018. © Sam Greene/The Enquirer A shipments entrance to AK Steel on Wicoff Street in Middletown, Ohio, on Monday, March 5, 2018.

The combined company will be run by Cleveland-Cliffs CEO Lourenco Goncalves.

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While the deal keeps control in Ohio, it will cost Cincinnati one of its eight Fortune 500 companies.

President Trump will also lose a vocal supporter of his trade wars. AK Steel CEO Roger Newport applauded tariffs on cheap imported steel that have battered the industry in America for years.

Though profitable in the past couple of years, AK Steel logged nearly a decade of red ink through 2016, squeezed by "steel dumping" and its heavy reliance on selling to troubled automakers.

Nearly two-thirds of AK Steel's $6.8 billion in sales was to automotive industry customers in 2018 – 11% was Ford and 10% an affiliate of Fiat Chrysler). The remaining sales were to the power industry as well as manufacturing.

The job impact was not specifically spelled out, but Cleveland-Cliffs said in a statement it will look for $120 million in cost cuts or "synergies."

The cuts will be accomplished in the first year after the deal closes "primarily from consolidating corporate functions, reducing duplicative overhead costs, and procurement and energy cost savings, as well as operational and supply chain efficiencies."

AK Steel employs 9,500 workers in North America and Europe. It has manufacturing operations across seven eastern states, Canada and Mexico, including its leased West Chester headquarters, a research and innnovation center in Middletown and its MIddletown Works facilities, which include a coke plant, blast furnace and mill operations.

The Middletown steel mill employs about 1,800 workers. The company has 2,500 total workers in the region.

The deal combines North America's largest producer of iron ore pellets with a leading producer of flat-rolled carbon, stainless and electrical steel products.“We are creating a premier North American company, self-sufficient in iron ore pellets and geared toward high value-added steel products,” Goncalves said.

For the latest on Cincinnati business, P&G, Kroger and Fifth Third Bank, follow @alexcoolidge on Twitter.

This article originally appeared on Cincinnati Enquirer: Cleveland mining company Cleveland-Cliffs taking over AK Steel

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