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Quarterly report pursuant to Section 13 or 15(d)

ACQUISITIONS (Tables)

v3.21.1
ACQUISITIONS (Tables)
 3 Months Ended
Mar. 31, 2021
Business Combinations [Abstract] Ìý
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 $ 990Ìý
Fair value of Series B Participating Redeemable Preferred Stock issued 738Ìý
Fair value of settlement of a pre-existing relationship 237Ìý
Cash consideration (subject to customary working capital adjustments) 635Ìý
Total purchase consideration $ 2,600Ìý
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 $ 12.66Ìý
Fair value of Cliffs common shares issued (in millions) $ 990Ìý
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 583,273Ìý
Redemption price per share as of December 9, 2020 $ 1,266Ìý
Fair value of Cliffs Series B Participating Redeemable Preferred Stock issued (in millions) $ 738Ìý
The fair value of the estimated cash consideration is comprised of the following:
(In Millions)
Cash consideration pursuant to the AM USA Transaction Agreement $ 505Ìý
Cash consideration for purchase of the remaining JV partner's interest of Kote and Tek 182Ìý
Estimated total cash consideration receivable (52)
Total estimated cash consideration $ 635Ìý
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 $ 97Ìý
Freestanding derivative asset from customer supply agreement 140Ìý
Total fair value of settlement of a pre-existing relationship $ 237Ìý
The fair value of the total purchase consideration was determined as follows:
(In Millions)
Fair value of AK Steel debt $ 914Ìý
Fair value of Cliffs common shares issued for AK Steel outstanding common stock1
618Ìý
Other1
3Ìý
Total purchase consideration $ 1,535Ìý
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 $ 590Ìý
7.50% Senior Secured Notes due July 2023 324Ìý
Fair value of debt included in consideration $ 914Ìý
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 $ 35Ìý $ —Ìý $ 35Ìý
Accounts receivable, net 349Ìý —Ìý 349Ìý
Inventories 2,115Ìý 14Ìý 2,129Ìý
Other current assets 34Ìý (5) 29Ìý
Property, plant and equipment 4,017Ìý 366Ìý 4,383Ìý
Other non-current assets 158Ìý 8Ìý 166Ìý
Accounts payable (758) 2Ìý (756)
Accrued employment costs (271) (3) (274)
Pension and OPEB liabilities, current (109) —Ìý (109)
Other current liabilities (398) (2) (400)
Pension and OPEB liabilities, non-current (3,195) —Ìý (3,195)
Other non-current liabilities (598) 35Ìý (563)
Noncontrolling interest (13) 1Ìý (12)
Net identifiable assets acquired 1,366Ìý 416Ìý 1,782Ìý
Goodwill 1,230Ìý (412) 818Ìý
Total net assets acquired $ 2,596Ìý $ 4Ìý $ 2,600Ìý
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 $ 38Ìý $ 1Ìý $ 39Ìý
Accounts receivable, net 666Ìý (2) 664Ìý
Inventories 1,563Ìý (243) 1,320Ìý
Other current assets 68Ìý (16) 52Ìý
Property, plant and equipment 2,184Ìý 90Ìý 2,274Ìý
Deferred income taxes —Ìý 69Ìý 69Ìý
Other non-current assets 475Ìý (4) 471Ìý
Accounts payable (636) (8) (644)
Accrued employment costs (94) 1Ìý (93)
Pension and OPEB liabilities, current (75) (3) (78)
Other current liabilities (236) 9Ìý (227)
Long-term debt (1,179) —Ìý (1,179)
Pension and OPEB liabilities, non-current (873) 2Ìý (871)
Other non-current liabilities (507) 72Ìý (435)
Noncontrolling interest —Ìý (1) (1)
Net identifiable assets acquired 1,394Ìý (33) 1,361Ìý
Goodwill 141Ìý 33Ìý 174Ìý
Total net assets acquired $ 1,535Ìý $ —Ìý $ 1,535Ìý
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 317Ìý
Exchange ratio 0.400Ìý
Number of Cliffs common shares issued to AK Steel stockholders 127Ìý
Price per share of Cliffs common shares $ 4.87Ìý
Fair value of Cliffs common shares issued for AK Steel outstanding common stock $ 618Ìý
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 $ 77Ìý 18
Developed technology 60Ìý 17
Trade names and trademarks 11Ìý 10
Total identifiable intangible assets $ 148Ìý 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 MarchÌý31, 2020, as if AK Steel had been acquired as of January 1, 2019:
(In Millions)
Three Months Ended
March 31,
2020
Revenues $ 1,526Ìý
Net loss attributable to Cliffs shareholders (17)