Cleveland-Cliffs Inc. (NYSE:CLF) entered into a definitive merger agreement to acquire AK Steel Holding Corporation (NYSE:AKS) for $1.1 billion on December 2, 2019. Cleveland-Cliffs will acquire all of the issued and outstanding shares of AK Steel common stock. Under the terms of the merger agreement, AK Steel shareholders will receive 0.40 shares of Cleveland-Cliffs common stock for each outstanding share of AK Steel common stock they own. Upon completion of the transaction, Cleveland-Cliffs' shareholders will own approximately 68% and AK Steel shareholders will own approximately 32% of the combined company, respectively, on a fully diluted basis. The transaction implies an aggregate consideration to AK Steel shareholders of approximately $1.1 billion on a fully diluted basis, a total enterprise value of approximately $3 billion for AK Steel. Cleveland-Cliffs has obtained an approximately $2 billion financing commitment from Credit Suisse in connection with a new asset backed loan and the refinancing of AK Steel's 2023 senior secured notes. AK Steel will become a direct, wholly-owned subsidiary of Cleveland-Cliffs and will retain its branding and corporate identity. Under the merger agreement, AK Steel Holding Corporation and Cleveland-Cliffs will be required to pay a termination fee equal to $30 million if the merger agreement is terminated in certain circumstances, including if such party terminates the merger agreement to accept a superior proposal or if the merger agreement is terminated because its board of directors has changed its recommendation.

Lourenco Goncalves, Chairman of the Board, President and Chief Executive Officer of Cleveland-Cliffs, will lead the expanded organization. Roger K. Newport will retire as a Chief Executive Officer and a Director of AK Steel. Three existing members of AK Steel's Board of Directors will join the Cleveland-Cliffs Board, and two existing Cleveland-Cliffs Board members will step down, bringing the Cleveland-Cliffs Board to 12 members in total. Cleveland-Cliffs will continue to be listed on the NYSE with its headquarters in Cleveland, while maintaining a significant presence at AK Steel's current offices in West Chester, Ohio along with its Research and Innovation Center in Middletown, Ohio.

The transaction is subject to approval by the shareholders of both companies at their meetings to be held on March 10, 2020, receipt of regulatory approvals and satisfaction of other customary closing conditions, Cleveland-Cliffs' shares issuable in the merger having been approved for listing on the NYSE, AK Steel having received the tax opinion from its tax counsel, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and Cleveland-Cliffs' registration statement on Form S-4 having become effective under the Securities Act of 1933. The transaction has been unanimously approved by both companies' Boards, and both Boards recommend that their respective shareholders vote in favor of the transaction. As of January 22, 2020, Federal Trade Commission has granted early termination of the waiting period under the Hart-Scott-Rodino for the transaction. Registration statement was declared effective on February 4, 2020. As of February 21, 2020, Cliffs and AK Steel received confirmation of clearance from the Mexican Competition Commission. Cliffs and AK Steel previously received the necessary regulatory clearance pursuant to the Competition Act (Canada). The transaction received all the necessary regulatory approvals required. The shareholders of both AK Steel and Cleveland-Cliffs approved the transaction at the special meeting held on March 10, 2020. The transaction is expected to close in the first half of 2020. As of February 11, 2020, the transaction is expected to close on March 13, 2020.

As of February 26, 2020, Cleveland-Cliffs announced that it intends to offer to sell $550 million aggregate principal amount of Senior Secured Notes due 2028 and $400 million aggregate principal amount of Senior Notes due 2028 in separate offerings. Notes offerings will be consummated prior to the consummation of the merger. As a result, the gross proceeds are expected to be deposited into an escrow account until the consummation of the merger. Cliffs intends to use the net proceeds from the notes offerings to repurchase, in the previously announced tender offers for any and all outstanding 7.625% senior notes due 2021 and 7.50% Senior Secured Notes due 2023 issued by AK Steel. The transaction is expected to be earnings accretive.

Moelis & Company LLC and Credit Suisse acted as financial advisors and James Dougherty, Michael J. Solecki and Ben Stulberg of Jones Day acted as legal advisors to Cleveland-Cliffs. Goldman Sachs & Co. LLC acted as financial advisor to AK Steel. Raymond O. Gietz, Amanda Fenster, Helyn Goldstein, Chayim Neubort, Amy Rubin, John Scribner, Morgan Bale, Faiza Rahman, Samuel Zylberberg and Brian Drozda of Weil, Gotshal & Manges LLP acted as legal advisors to AK Steel. BofA Securities, Inc. acted as financial advisor to Cleveland-Cliffs. Philip Richter of Fried Frank acted as legal advisor to Goldman Sachs. Moelis & Company LLC will receive a fee of $11 million for its services contingent upon the consummation of the merger and will receive an additional $3 million payable upon the delivery of its opinion. Goldman Sachs & Co. LLC will receive a fee of $26.5 million. Okapi Partners LLC acted as the information agent to Cleveland-Cliffs and will receive a fee of $0.05 million. Georgeson LLC acted as the information agent to AK Steel and will receive a fee of $0.018 million.