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ACQUISITIONS (Tables) | 12 Months Ended
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Dec. 31, 2022
Business Combinations [Abstract] |
Schedule of Fair Value of Purchase Consideration | The fair value of the total purchase consideration was determined as follows:
(In millions) |
Cash consideration: |
Cash consideration pursuant to the FPT Acquisition Agreement | $ | 778 |
Cash consideration paid related to IRC Section 338(h)(10) | 23 |
Total cash consideration | 801 |
Fair value of settlement of a pre-existing relationship | (20) |
Total purchase consideration | $ | 781 |
(In millions) | Initial Allocation of Consideration |  | Measurement Period Adjustments |  | Final Allocation of Consideration as of December 31, 2022
Cash and cash equivalents | $ | 9 |  |  | $ | — |  |  | $ | 9 |
Accounts receivable, net | 233 |  |  | 2 |  |  | 235 |
Inventories | 137 |  |  | (2) |  |  | 135 |
Other current assets | 4 |  |  | (1) |  |  | 3 |
Property, plant and equipment | 179 |  |  | 12 |  |  | 191 |
Other non-current assets | 74 |  |  | (2) |  |  | 72 |
Accounts payable | (122) |  |  | — |  |  | (122) |
Accrued employment costs | (8) |  |  | — |  |  | (8) |
Other current liabilities | (9) |  |  | 3 |  |  | (6) |
Other non-current liabilities | (21) |  |  | — |  |  | (21) |
Net identifiable assets acquired | 476 |  |  | 12 |  |  | 488 |
Goodwill | 279 |  |  | 14 |  |  | 293 |
Total net assets acquired | $ | 755 |  |  | $ | 26 |  |  | $ | 781 |
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 Cliffs Series B Participating Redeemable Preferred Stock issued | 738 |
Fair value of settlement of a pre-existing relationship | 237 |
Cash consideration | 639 |
Total purchase consideration | $ | 2,604 |
The fair value of Cliffs common shares issued was 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 was 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 cash consideration was 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 |
Cash consideration pursuant to working capital adjustments | (48) |
Total cash consideration | $ | 639 |
The cash portion of the purchase price was subject to customary working capital adjustments, and the working capital adjustments were finalized during the second quarter of 2021. We made certain elections under Section 338(h)(10) of the IRC with respect to entities acquired in connection with the AM USA Transaction, which did not change the final cash consideration. The fair value of the settlement of a pre-existing relationship was 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 |
VALUATION ASSUMPTION AND PURCHASE PRICE ALLOCATION 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 | 618 |
Other | 3 |
Total purchase consideration | $ | 1,535 |
The fair value of AK Steel's debt included in the consideration was calculated as follows:
(In millions) |
Credit Facility | $ | 590 |
7.500% Senior Secured Notes due July 2023 | 324 |
Fair value of debt included in consideration | $ | 914 |
Summary of Purchase Price Allocated to Identifiable Intangible Assets and Liabilities Acquired | The purchase price allocated to identifiable intangible assets acquired was:
| (In millions) |  | Weighted Average Life (In years)
Customer relationships | $ | 13 |  |  | 15
Supplier relationships | 29 |  |  | 18
Trade names and trademarks | 7 |  |  | 15
Total identifiable intangible assets | $ | 49 |  |  | 17
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
Summary of the Purchase Price Allocation to Assets Acquired and Liabilities Assumed | The following is a summary of the purchase price allocation to assets acquired and liabilities assumed in the AM USA Transaction:
(In millions) | Initial Allocation of Consideration |  | Measurement Period Adjustments |  | Final Allocation Consideration as of December 31, 2021
Cash and cash equivalents | $ | 35 |  |  | $ | — |  |  | $ | 35 |
Accounts receivable, net | 349 |  |  | (3) |  |  | 346 |
Inventories | 2,115 |  |  | 14 |  |  | 2,129 |
Other current assets | 34 |  |  | 2 |  |  | 36 |
Property, plant and equipment | 4,017 |  |  | 387 |  |  | 4,404 |
Deferred income taxes | — |  |  | 285 |  |  | 285 |
Other non-current assets | 158 |  |  | 7 |  |  | 165 |
Accounts payable | (736) |  |  | 8 |  |  | (728) |
Accrued employment costs | (271) |  |  | 5 |  |  | (266) |
State and local taxes | (76) |  |  | — |  |  | (76) |
Other current liabilities | (453) |  |  | 23 |  |  | (430) |
Pension liability, non-current | (730) |  |  | — |  |  | (730) |
OPEB liability, non-current | (2,465) |  |  | — |  |  | (2,465) |
Other non-current liabilities | (598) |  |  | (171) |  |  | (769) |
Noncontrolling interest | (13) |  |  | 21 |  |  | 8 |
Net identifiable assets acquired | 1,366 |  |  | 578 |  |  | 1,944 |
Goodwill | 1,230 |  |  | (570) |  |  | 660 |
Total net assets acquired | $ | 2,596 |  |  | $ | 8 |  |  | $ | 2,604 |
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) |
State and local taxes | (35) |  |  | 4 |  |  | (31) |
Other current liabilities | (276) |  |  | 2 |  |  | (274) |
Long-term debt | (1,179) |  |  | — |  |  | (1,179) |
Pension liability, non-current | (473) |  |  | 10 |  |  | (463) |
OPEB liability, non-current | (400) |  |  | (8) |  |  | (408) |
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 Common Shares Issues upon Completion of Merger | 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 was 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 |
Shares 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 outstanding AK Steel common stock | $ | 618 |
Summary of Unaudited Pro Forma Financial Information | The following table provides unaudited pro forma financial information, prepared in accordance with Topic 805, as if ArcelorMittal USA and AK Steel had been acquired as of January 1, 2019:
| Year Ended
(In millions) | December 31, 2020
Revenues | $ | 12,837 |
Net loss attributable to Cliffs shareholders | (520) |
The following table provides unaudited pro forma financial information, prepared in accordance with Topic 805, as if FPT had been acquired as of January 1, 2020:
| Year Ended December 31,
(In millions) | 2021 |  | 2020
Revenues | $ | 21,701 |  |  | $ | 13,549 |
Net income (loss) attributable to Cliffs shareholders | 3,074 |  |  | (526) |

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