Background Information

In September of 2020, ArcelorMittal announced they were selling all of their steelmaking assets in the United States.

The Company

ArcelorMittal S.A. is a Luxembourgish multinational steel manufacturing corporation headquartered in Luxembourg City. It was formed in 2006 from the takeover and merger of Arcelor by Indian-owned Mittal Steel. ArcelorMittal is the world's largest steel producer, with an annual crude steel production of 92.5 million metric tonnes as of 2018 and sales of approximately 70 billion dollars. It is ranked 120th in the 2019 Fortune Global 500 ranking of the world's largest corporations.

The Decision

The blockbuster deal includes several steel mills: ArcelorMittal Indiana Harbor in East Chicago; ArcelorMittal Burns Harbor in Porter County; ArcelorMittal Riverdale in Illinois; and the Gary Plate finishing facility located inside U.S. Steel's Gary Works steel mill. It also includes ArcelorMittal USA's interest in I/N Tek JV and I/N Kote JV in New Carlisle, which ArcelorMittal jointly owns with Japan-based Nippon Steel.

After the early 2000s upheaval in the American steel industry, many of the mills that have lined Northwest Indiana's lakeshore, in some cases for more than a century, ended up consolidated in the hands of either U.S. Steel, the world's first billion-dollar company, or ArcelorMittal, which has been the world's largest steelmaker for years.

Now, following more than a decade of stability, another seismic shake-up is taking place along the highly industrialized southern shore of Lake Michigan.

A new owner is coming to town.

The latest round of consolidation in the long-declining domestic steel industry will make Cleveland-Cliffs an iron ore mining and pelletization company for most of its 173-year existence the largest flat-rolled steelmaker in North America, with shipments of 17 million tons last year. The company, which owns mines in Minnesota and Michigan and ships its ore to steel mills along the Great Lakes, also is the largest iron ore pellet producer in North America with 28 million long tons of capacity.

Cleveland-Cliffs is buying six steel mills, eight finishing facilities, two iron ore mining and pelletizing operations and three coal and cokemaking operations from ArcelorMittal for $505 million in cash, $373 million in non-voting stock and 78.2 million shares of Cleveland-Cliffs common stock. The enterprise value of the deal, which includes debt and market capitalization, is estimated to be around $3.3 billion.

ArcelorMittal USA pulled in $10.4 billion in revenue over the past two years, including $700 million in earnings before interest, taxes, depreciation and amortization, or EBITDA. Cleveland-Cliffs expects the merger will result in about $150 million in annual cost savings, which traditionally would be achieved at least partly through layoffs of redundant positions, though ArcelorMittal USA's former steel mills also no longer would have to pay market prices for iron ore, the most basic ingredient of steel.

This transaction is a unique opportunity for ArcelorMittal to unlock significant value for shareholders while retaining exposure to the North American economy through our high-quality NAFTA assets alongside a participation in what will be a stronger, better integrated U.S. business," ArcelorMittal Chairman and CEO Lakshmi Mittal said. "I would like to thank all employees of ArcelorMittal USA for their hard work in ensuring the business maintained its reputation as a trusted, quality supplier of steels for American manufacturing. I am confident you will have a bright future with Cleveland-Cliffs.

The Assignment

For this assignment, prepare a short analysis of the ArcelorMittal decision that must include:

• Develop a State of Nature for the decision ArcelorMittal has made. Your State of Nature should have at least 3 options associated with it. Justify your selections. Also include the probability for each State.

• Develop a set of Alternatives ArcelorMittal might have used for the decision. Develop at least 3 and include a justification for each.

• Your opinion of ArcelorMittals decision and the justification for your reasoning.