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ACQUISITIONS | 12 Months Ended
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Dec. 31, 2024
Business Combinations [Abstract] |
Acquisitions | NOTE 3 - ACQUISITIONS STELCO ACQUISITION OVERVIEW On November 1, 2024, pursuant to the Arrangement Agreement, we completed the Stelco Acquisition, in which we were the acquirer. The Stelco Acquisition expands our existing presence in Canada and diversifies our customer base across service centers, construction and other industrial end markets with higher volumes of spot sales. Following the Stelco Acquisition, the operating results of Stelco are included in our consolidated financial statements. For the period subsequent to the acquisition (November 1, 2024 through December 31, 2024), Stelco generated Revenues of $329 million and a loss of $58 million included within Net income (loss) attributable to Cliffs shareholders. Additionally, we incurred acquisition related costs of $42 million for the year ended December 31, 2024, in connection with the Stelco Acquisition, which were recorded in Acquisition-related costs on the Statements of Consolidated Operations. The Stelco Acquisition was accounted for under the acquisition method of accounting for business combinations. The fair value of the total purchase consideration was determined as follows:
(In millions) |
Total cash consideration | $ | 2,450 |
Total share exchange consideration | 343 |
Total debt consideration | 415 |
Total purchase consideration | $ | 3,208 |
Total consideration shares are calculated as follows:
Number of outstanding Stelco shares | 54,448,388 |
Number of outstanding share-based compensation awards | 2,516,415 |
Total consideration shares | 56,964,803 |
Total estimated cash consideration is calculated as follows:
Number of consideration shares | 56,964,803 |
Consideration share price per share (CAD) | $ | 60.00 |
Total cash consideration (CAD) (in millions) | 3,418 |
Exchange rate (November 1, 2024) | 0.7168 |
Total cash consideration (USD) | $ | 2,450 |
The fair value of share exchange consideration is as follows:
Number of consideration shares | 56,964,803 |
Fixed share exchange factor | 0.454 |
Total Cliffs exchange shares | 25,862,021 |
Cliffs share price at closing date (November 1, 2024) | $ | 13.27 |
Total share exchange consideration (in millions) | $ | 343 |
The fair value of debt consideration includes outstanding obligations with preexisting change-in-control provisions requiring repayment at the time of closing. The debt consideration includes amounts repaid in connection with retiring Stelco's asset-based lending facility and inventory monetization arrangement. VALUATION ASSUMPTION AND PURCHASE PRICE ALLOCATION We estimated fair values at November 1, 2024 for the preliminary allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in connection with the Stelco Acquisition. During the measurement period, we will continue to obtain information to assist in finalizing the fair value of assets acquired and liabilities assumed, which may differ materially from these preliminary estimates. If we determine any measurement period adjustments are material, we will apply those adjustments, including any related impacts to net income, in the reporting period in which the adjustments are determined. We are in the process of conducting a valuation of the assets acquired and liabilities assumed related to the Stelco Acquisition, most notably, inventories, personal and real property, leases, deferred taxes, employee benefit commitments, financing obligations, environmental obligations, asset retirement obligations and intangible assets, and the final allocation will be made when completed, including the result of any identified goodwill. Accordingly, the provisional measurements noted below are preliminary and subject to modification in the future. The preliminary purchase price allocation to assets acquired and liabilities assumed in the Stelco Acquisition was:
| (in Millions) |  |  |  |
Cash and cash equivalents | $ | 341 |  |  |  |  |
Accounts receivable | 104 |  |  |  |  |
Inventories | 726 |  |  |  |  |
Other current assets | 107 |  |  |  |  |
Property, plant and equipment | 1,286 |  |  |  |  |
Intangible assets | 1,025 |  |  |  |  |
Other non-current assets | 250 |  |  |  |  |
Accounts payable | (212) |  |  |  |  |
Accrued employment costs | (29) |  |  |  |  |
Accrued expenses | (6) |  |  |  |  |
Other current liabilities | (71) |  |  |  |  |
Pension and OPEB liability, non-current | (14) |  |  |  |  |
Deferred income taxes | (449) |  |  |  |  |
Asset retirement and environmental obligations | (20) |  |  |  |  |
Other non-current liabilities | (616) |  |  |  |  |
Net identifiable assets acquired | 2,422 |  |  |  |  |
Goodwill | 786 |  |  |  |  |
Total net assets acquired | $ | 3,208 |  |  |  |  |
The goodwill resulting from the Stelco Acquisition primarily represents the growth opportunities through diversification within our customer base across service centers, construction and other industrial end markets with higher volumes of spot sales, as well as any synergistic benefits to be realized from the Stelco Acquisition within our Steelmaking segment. Goodwill is not expected to be deductible for U.S. federal income tax purposes. The purchase price allocated to identifiable intangible assets acquired was:
| (In millions) |  | Weighted Average Life (In years)
Intangible assets: |  |  |
Customer relationships | 953 |  | 15
Trade names and trademarks | 72 |  | 15
Total identifiable intangible assets | $ | 1,025 |  |  | 15
PRO FORMA RESULTS The following table provides unaudited pro forma financial information, prepared in accordance with Topic 805, as if Stelco had been acquired as of January 1, 2023:
| Year Ended December 31,
(In millions) | 2024 |  | 2023
Revenues | $ | 20,874 |  |  | $ | 24,158 |
Net income (loss) attributable to Cliffs shareholders | (623) |  |  | 216 |
The unaudited pro forma financial information has been calculated after applying our accounting policies and adjusting the historical results with pro forma adjustments, net of tax, that assume the Stelco Acquisition occurred on January 1, 2023. Significant non-recurring pro forma adjustments include the following: 1.The 2024 pro forma net loss was adjusted to exclude $23 million of non-recurring inventory acquisition accounting adjustments incurred during the year ended December 31, 2024. The 2023 pro forma net income was adjusted to include $23 million of non-recurring inventory acquisition accounting adjustments for the year ended December 31, 2023. 2.The 2024 pro forma net loss was adjusted to exclude $63 million of transaction costs incurred by Cliffs and Stelco in connection with the Stelco Acquisition for the year ended December 31, 2024. The 2023 pro forma net income was adjusted to include $63 million of transaction cost adjustments for the year ended December 31, 2023. The unaudited pro forma financial information does not reflect the potential realization of synergies or cost savings, nor does it reflect other costs relating to the integration of the acquired company. This unaudited pro forma financial information should not be considered indicative of the results that would have actually occurred if the Stelco Acquisition had been consummated on January 1, 2023, nor are they indicative of future results.

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