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ACQUISITIONS (Tables) | 3 Months Ended
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Mar. 31, 2021
Business Combinations [Abstract] |
Schedule of Business Acquisitions by Acquisition, by Acquisition | The fair value of the total purchase consideration was determined as follows:
| (In Millions)
Fair value of Cliffs common shares issued | $ | 990 |
Fair value of Series B Participating Redeemable Preferred Stock issued | 738 |
Fair value of settlement of a pre-existing relationship | 237 |
Cash consideration (subject to customary working capital adjustments) | 635 |
Total purchase consideration | $ | 2,600 |
The fair value of Cliffs common shares issued is calculated as follows:
Number of Cliffs common shares issued | 78,186,671
Closing price of Cliffs common share as of December 9, 2020 | $ | 12.66 |
Fair value of Cliffs common shares issued (in millions) | $ | 990 |
The fair value of Cliffs Series B Participating Redeemable Preferred Stock issued is calculated as follows:
Number of Cliffs Series B Participating Redeemable Preferred Stock issued | 583,273 |
Redemption price per share as of December 9, 2020 | $ | 1,266 |
Fair value of Cliffs Series B Participating Redeemable Preferred Stock issued (in millions) | $ | 738 |
The fair value of the estimated cash consideration is comprised of the following:
| (In Millions)
Cash consideration pursuant to the AM USA Transaction Agreement | $ | 505 |
Cash consideration for purchase of the remaining JV partner's interest of Kote and Tek | 182 |
Estimated total cash consideration receivable | (52) |
Total estimated cash consideration | $ | 635 |
The cash portion of the purchase price is subject to customary working capital adjustments. The fair value of the settlement of a pre-existing relationship is comprised of the following:
| (In Millions)
Accounts receivable | $ | 97 |
Freestanding derivative asset from customer supply agreement | 140 |
Total fair value of settlement of a pre-existing relationship | $ | 237 |
The fair value of the total purchase consideration was determined as follows:
| (In Millions)
Fair value of AK Steel debt | $ | 914 |
Fair value of Cliffs common shares issued for AK Steel outstanding common stock 1 | 618 |
Other 1 | 3 |
Total purchase consideration | $ | 1,535 |
1 Included as non-cash investing activities in Statements of Unaudited Condensed Consolidated Cash Flows for the three months ended March 31, 2020.
The fair value of AK Steel's debt included in the consideration is calculated as follows:
| (In Millions)
Credit Facility | $ | 590 |
7.50% Senior Secured Notes due July 2023 | 324 |
Fair value of debt included in consideration | $ | 914 |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The preliminary purchase price allocation to assets acquired and liabilities assumed in the AM USA Transaction was:
| (In Millions)
| Initial Allocation of Consideration |  | Measurement Period Adjustments |  | Updated Allocation
Cash and cash equivalents | $ | 35 |  |  | $ | — |  |  | $ | 35 |
Accounts receivable, net | 349 |  |  | — |  |  | 349 |
Inventories | 2,115 |  |  | 14 |  |  | 2,129 |
Other current assets | 34 |  |  | (5) |  |  | 29 |
Property, plant and equipment | 4,017 |  |  | 366 |  |  | 4,383 |
Other non-current assets | 158 |  |  | 8 |  |  | 166 |
Accounts payable | (758) |  |  | 2 |  |  | (756) |
Accrued employment costs | (271) |  |  | (3) |  |  | (274) |
Pension and OPEB liabilities, current | (109) |  |  | — |  |  | (109) |
Other current liabilities | (398) |  |  | (2) |  |  | (400) |
Pension and OPEB liabilities, non-current | (3,195) |  |  | — |  |  | (3,195) |
Other non-current liabilities | (598) |  |  | 35 |  |  | (563) |
Noncontrolling interest | (13) |  |  | 1 |  |  | (12) |
Net identifiable assets acquired | 1,366 |  |  | 416 |  |  | 1,782 |
Goodwill | 1,230 |  |  | (412) |  |  | 818 |
Total net assets acquired | $ | 2,596 |  |  | $ | 4 |  |  | $ | 2,600 |
The following is a summary of the purchase price allocation to assets acquired and liabilities assumed in the AK Steel Merger:
| (In Millions)
| Initial Allocation of Consideration |  | Measurement Period Adjustments |  | Final Allocation of Consideration as of March 31, 2021
Cash and cash equivalents | $ | 38 |  |  | $ | 1 |  |  | $ | 39 |
Accounts receivable, net | 666 |  |  | (2) |  |  | 664 |
Inventories | 1,563 |  |  | (243) |  |  | 1,320 |
Other current assets | 68 |  |  | (16) |  |  | 52 |
Property, plant and equipment | 2,184 |  |  | 90 |  |  | 2,274 |
Deferred income taxes | — |  |  | 69 |  |  | 69 |
Other non-current assets | 475 |  |  | (4) |  |  | 471 |
Accounts payable | (636) |  |  | (8) |  |  | (644) |
Accrued employment costs | (94) |  |  | 1 |  |  | (93) |
Pension and OPEB liabilities, current | (75) |  |  | (3) |  |  | (78) |
Other current liabilities | (236) |  |  | 9 |  |  | (227) |
Long-term debt | (1,179) |  |  | — |  |  | (1,179) |
Pension and OPEB liabilities, non-current | (873) |  |  | 2 |  |  | (871) |
Other non-current liabilities | (507) |  |  | 72 |  |  | (435) |
Noncontrolling interest | — |  |  | (1) |  |  | (1) |
Net identifiable assets acquired | 1,394 |  |  | (33) |  |  | 1,361 |
Goodwill | 141 |  |  | 33 |  |  | 174 |
Total net assets acquired | $ | 1,535 |  |  | $ | — |  |  | $ | 1,535 |
Schedule of Business Acquisitions by Acquisition, Equity Interest Issued or Issuable | The fair value of Cliffs common shares issued for outstanding shares of AK Steel common stock and with respect to Cliffs common shares underlying converted AK Steel equity awards that vested upon completion of the AK Steel Merger is calculated as follows:
| (In Millions, Except Per Share Amounts)
Number of shares of AK Steel common stock issued and outstanding | 317 |
Exchange ratio | 0.400 |
Number of Cliffs common shares issued to AK Steel stockholders | 127 |
Price per share of Cliffs common shares | $ | 4.87 |
Fair value of Cliffs common shares issued for AK Steel outstanding common stock | $ | 618 |
Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination | The purchase price allocated to identifiable intangible assets and liabilities acquired was:
| (In Millions) |  | Weighted Average Life (In Years)
Intangible assets: |  |  |
Customer relationships | $ | 77 |  |  | 18
Developed technology | 60 |  |  | 17
Trade names and trademarks | 11 |  |  | 10
Total identifiable intangible assets | $ | 148 |  |  | 17
Intangible liabilities: |  |  |
Above-market supply contracts | $ | (71) |  |  | 12
Business Acquisition, Pro Forma Information | The following table provides unaudited pro forma financial information, prepared in accordance with Topic 805, for the three months ended March 31, 2020, as if AK Steel had been acquired as of January 1, 2019:
|  |  |  |  |  |  | (In Millions)
|  |  |  |  | Three Months Ended March 31,
|  |  |  |  |  |  | 2020
Revenues |  |  |  |  |  |  | $ | 1,526 |
Net loss attributable to Cliffs shareholders |  |  |  |  |  |  | (17) |

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