Cleveland-Cliffs (CLF) Acquires Ferrous Processing and Trading Company for EV of $775M

Cleveland-Cliffs Inc. (the “Company”) (NYSE: CLF) announced today that it has entered into a definitive agreement to acquire Ferrous Processing and Trading Company, including certain related entities (“FPT”), for a total enterprise value of approximately $775 million, on a cash-free, debt-free basis and subject to customary adjustment (“the FPT Acquisition”). Based in Detroit, FPT is among the largest processors and distributors of prime ferrous scrap in the United States, representing approximately 15% of the domestic merchant prime scrap market. FPT currently processes approximately three million tons of scrap per year, approximately half of which is prime grade.

FPT operates 22 scrap processing facilities, with approximately 90% of revenues originating from its Midwest locations, primarily in Michigan and Ohio. In the trailing twelve months ended August 31, 2021, FPT generated EBITDA of approximately $100 million. FPT already enjoys an outsized position in automotive and industrial scrap, which is expected to grow as part of Cleveland-Cliffs. FPT was Fastmarkets’ 2019 winner of Scrap Company of the Year.

Lourenco Goncalves, Cleveland-Cliffs’ Chairman, President and CEO said, “Cleveland-Cliffs is entering the scrap business as a major player through the acquisition of a large scrap company. Even more importantly, FPT has a very meaningful presence in prime scrap. With all the new flat-rolled EAF capacity coming online in our market over the next four years, prime scrap will only become more and more scarce. As the largest supplier of flat rolled steel in North America, Cleveland-Cliffs is the main source of the steel that generates prime scrap in manufacturing facilities. Furthermore, throughout our entire footprint, Cleveland-Cliffs also consumes a very significant amount of scrap in our EAFs and BOFs. The acquisition of FPT will enhance our ability to buy back prime scrap directly from our clients, cutting the middlemen and improving the margin contribution from scrap for both Cleveland-Cliffs and for the manufacturing and service center clients that will be able to sell scrap directly back to us.”

Transaction rationale:

• Allows Cliffs to optimize productivity at its existing EAFs and BOFs as the Company has no current plans to add additional steelmaking capacity
• Expands portfolio of high-quality ferrous raw materials to include iron ore pellets, direct-reduced iron, and now prime scrap
• Immediately secures substantial access to prime scrap, where demand is expected to grow dramatically with limited to no growth in corresponding supply
• Creates a platform for Cliffs to leverage long-standing flat-rolled automotive and other customer relationships into recycling partnerships to grow prime scrap presence
• Furthers commitment to environmentally-friendly, low-carbon intensity steelmaking with cleaner materials mix

The acquisition has been approved by the board of directors of Cleveland-Cliffs and is expected to close in the fourth quarter of 2021, subject to the receipt of regulatory approval and the satisfaction of other customary closing conditions.

Presentation slides related to the FPT acquisition will be available on the Cliffs’ website. The Company will discuss the acquisition in further detail on its third-quarter 2021 earnings conference call on October 22, 2021, at 10:00am ET.

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