As filed with the Securities and Exchange Commission on January 27, 2020

Registration No. 333-235855

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

CLEVELAND-CLIFFS INC.

(Exact name of registrant as specified in its charter)

 

 

 

Ohio		1000		34-1464672
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

200 Public Square, Suite 3300

Cleveland, Ohio 44114-2315

Telephone: (216) 694-5700

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

James D. Graham

Executive Vice President, Chief Legal Officer & Secretary

Cleveland-Cliffs Inc.

200 Public Square, Suite 3300

Cleveland, Ohio 44114-2315

Telephone: (216) 694-5700

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

With a copy to:

 

James P. Dougherty, Esq. Benjamin L. Stulberg, Esq. Michael J. Solecki, Esq. Jones Day 901 Lakeside Avenue Cleveland, Ohio 44114 (216) 586-3939		Joseph C. Alter Vice President, General Counsel and Corporate Secretary AK Steel Holding Corporation 9227 Centre Pointe Drive West Chester, Ohio 45069 (513) 425-5000		Raymond O. Gietz, Esq. Amanda Fenster, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 (212) 310-8000

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement is declared effective and upon completion of the proposed merger described in the enclosed joint proxy statement/prospectus.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		☒		Accelerated filer		☐
Non-accelerated filer		☐		Smaller reporting company		☐
				Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to Be Registered		Amount to be Registered		Proposed Maximum Offering Price Per Unit		Proposed Maximum Aggregate Offering Price(1)		Amount of Registration Fee(2)
Common shares, par value $0.125 per share		133,135,043		N/A		$1,031,796,585		$133,927.20

(1)	Computed in accordance with Rule 457(f) under the Securities Act of 1933.

(2)	Previously paid in connection with the initial filing of the registration statement on January 8, 2020.

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

The information contained herein, including in the accompanying joint proxy statement/prospectus is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This document is not an offer to sell these securities and does not constitute the solicitation of an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY—SUBJECT TO COMPLETION, DATED JANUARY 27, 2020

 

 

Dear Shareholders and Stockholders:

As previously announced, on December 2, 2019, Cleveland-Cliffs Inc., which is referred to as Cliffs, AK Steel Holding Corporation, which is referred to as AK Steel, and Pepper Merger Sub Inc., which is referred to as Merger Sub, entered into an Agreement and Plan of Merger, which is referred to as the Merger Agreement, providing for Cliffs’ acquisition of AK Steel. Under the terms of the Merger Agreement, Merger Sub will merge with and into AK Steel, which is referred to as the Merger, and AK Steel will survive the Merger and become a direct, wholly owned subsidiary of Cliffs. Cliffs shareholders as of the close of business on [                ], 2020, the record date, are invited to attend a special meeting of Cliffs shareholders, to be held on [                ], 2020, at [                ] Eastern Time, to consider and vote on a proposal to approve the Merger Agreement and the transactions contemplated by the Merger Agreement, including the issuance of common shares, par value $0.125 per share, of Cliffs, which are referred to as Cliffs common shares, in connection with the Merger as well as a proposal regarding the potential adjournment of the Cliffs special meeting. AK Steel stockholders as of the close of business on the record date are invited to attend a special meeting of AK Steel stockholders, to be held on [                ], 2020, at [                ] Eastern Time, to consider and vote on a proposal to adopt the Merger Agreement as well as proposals regarding certain other matters related to the Merger and the AK Steel special meeting.

If the Merger is completed, each share of common stock, par value $0.01 per share, of AK Steel, which is referred to as AK Steel common stock, issued and outstanding immediately prior to the effective time of the Merger (other than AK Steel restricted shares and any shares of AK Steel common stock owned by Cliffs, Merger Sub or AK Steel, unless held on behalf of third parties) will be converted into the right to receive 0.400 Cliffs common shares, which is referred to as the merger consideration, and, if applicable, cash in lieu of any fractional shares. For more details on the merger consideration, see the section entitled “The Merger—Consideration to AK Steel Stockholders” beginning on page [    ] of the accompanying joint proxy statement/prospectus.

The market value of the merger consideration will fluctuate with the market price of Cliffs common shares and will not be known at the time both Cliffs shareholders and AK Steel stockholders vote on the Merger. Based on the closing share price of Cliffs common shares on the New York Stock Exchange, which is referred to as the NYSE, on December 2, 2019, the last full trading day before the public announcement of the Merger Agreement, of $8.41 per share, the implied value of the merger consideration to AK Steel stockholders was approximately $3.36 per share of AK Steel common stock. On January 24, 2020, the last practicable trading day before the date of the filing of the accompanying joint proxy statement/prospectus, the closing share price of Cliffs common shares on the NYSE was $7.38 per share, resulting in an implied value to AK Steel stockholders of $2.95 per share of AK Steel common stock. We urge you to obtain current market quotations for Cliffs common shares and AK Steel common stock.

Cliffs common shares are traded on the NYSE under the symbol “CLF,” and AK Steel common stock is traded on the NYSE under the symbol “AKS.” Cliffs expects to issue approximately 133.1 million Cliffs common shares to AK Steel stockholders in the Merger (including shares underlying AK Steel equity awards expected to be outstanding at the effective time of the Merger, which will be converted into awards with respect to Cliffs common shares). Based on the number of shares of AK Steel common stock and Cliffs common shares outstanding as of January 24, 2020, we estimate that, immediately following completion of the Merger, former holders of AK Steel common stock will own approximately 32% of the outstanding Cliffs common shares.

The Merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. Assuming the Merger qualifies as a reorganization, a stockholder of AK Steel generally will not recognize any gain or loss upon receipt of Cliffs common shares in the Merger, and will recognize gain or loss with respect to any cash received in lieu of a fractional Cliffs

common share, as discussed in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page [    ] of the accompanying joint proxy statement/prospectus.

Each of Cliffs and AK Steel will hold a special meeting of its shareholders or stockholders, as applicable, to consider certain matters relating to the proposed Merger, as well as certain other matters. Cliffs and AK Steel cannot complete the proposed Merger unless, among other things, Cliffs shareholders approve the Merger Agreement and the transactions contemplated by the Merger Agreement, including the issuance of Cliffs common shares in connection with the Merger, and AK Steel stockholders adopt the Merger Agreement.

Your vote is very important. To ensure your representation at your company’s special meeting, please complete and return the enclosed proxy card or submit your proxy via the Internet or by telephone. Please vote promptly whether or not you expect to attend your company’s special meeting. Submitting a proxy now will not prevent you from being able to vote in person at your company’s special meeting if you are otherwise eligible to vote at such meeting.

The Cliffs board of directors has unanimously determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, including the issuance of Cliffs common shares in connection with the Merger, are in the best interests of Cliffs and its shareholders; has unanimously approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, including the issuance of Cliffs common shares in connection with the Merger; and unanimously recommends that Cliffs shareholders vote “FOR” the proposal to approve the Merger Agreement and the transactions contemplated by the Merger Agreement, including the issuance of Cliffs common shares in connection with the Merger, and “FOR” the adjournment proposal, as described in the accompanying joint proxy statement/prospectus.

The AK Steel board of directors has unanimously determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, are advisable and in the best interests of AK Steel and its stockholders; has unanimously approved the Merger Agreement; and unanimously recommends that AK Steel stockholders vote “FOR” the proposal to adopt the Merger Agreement and “FOR” each of the other proposals at the AK Steel special meeting, as described in the accompanying joint proxy statement/prospectus.

The obligations of Cliffs and AK Steel to complete the Merger are subject to the satisfaction or waiver (if permitted) of the conditions set forth in the Merger Agreement, a copy of which is included as part of the accompanying joint proxy statement/prospectus. The accompanying joint proxy statement/prospectus provides you with detailed information about the proposed Merger and the transactions contemplated by the Merger Agreement. It also contains or references information about Cliffs and AK Steel and certain related matters. You are encouraged to read the accompanying joint proxy statement/prospectus carefully and in its entirety.

In particular, you should carefully read the section entitled “Risk Factors” beginning on page [    ] of the accompanying joint proxy statement/prospectus for a discussion of risks you should consider in evaluating the Merger Agreement and the transactions contemplated by the Merger Agreement, including the issuance of Cliffs common shares in connection with the Merger and how they will affect you.

We look forward to the successful completion of the Merger.

 

Lourenco Goncalves Chairman, President and Chief Executive Officer Cleveland-Cliffs Inc.		Roger K. Newport Chief Executive Officer AK Steel Holding Corporation

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Merger, the adoption of the Merger Agreement, the Cliffs common shares to be issued in connection with the Merger or any other transactions described in the accompanying joint proxy statement/prospectus, or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

This document is dated [                ], 2020, and is first being mailed to Cliffs shareholders and AK Steel stockholders on or about [                ], 2020.

CLEVELAND-CLIFFS INC. NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON [                ], 2020 AT [                ]

NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Cleveland-Cliffs Inc., which is referred to as Cliffs, will be held on [                ], 2020, at [                ] Eastern Time at [                ], for the following purposes:

 

•

to consider and vote on a proposal to approve the Merger Agreement (as defined below) and the transactions contemplated by the Merger Agreement, including the issuance of common shares, par value $0.125 per share, of Cliffs, which are referred to as Cliffs common shares, in connection with the Merger (as defined below), which is referred to as the Cliffs merger proposal; and

 

•

to consider and vote on a proposal to adjourn the Cliffs special meeting, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the Cliffs special meeting to approve the Cliffs merger proposal, which is referred to as the Cliffs adjournment proposal.

Cliffs shareholders’ approval of the Cliffs merger proposal is required to complete the acquisition of AK Steel Holding Corporation, which is referred to as AK Steel, by Cliffs by way of the merger of Pepper Merger Sub Inc., which is referred to as Merger Sub, with and into AK Steel, with AK Steel continuing as the surviving corporation and as a direct, wholly owned subsidiary of Cliffs, which is referred to as the Merger, pursuant to the Agreement and Plan of Merger, dated as of December 2, 2019, among Cliffs, AK Steel and Merger Sub, which, as such agreement may be amended from time to time, is referred to as the Merger Agreement. If necessary, Cliffs shareholders will be asked to approve the Cliffs adjournment proposal. Cliffs does not intend to transact any other business at the Cliffs special meeting. The record date for the Cliffs special meeting has been set as [                ], 2020. Only Cliffs shareholders of record as of the close of business on such record date are entitled to notice of, and to vote at, the Cliffs special meeting or any adjournments and postponements thereof. For additional information, see the section entitled “Special Meeting of Cliffs Shareholders” beginning on page [    ] of the joint proxy statement/prospectus accompanying this notice.

The Cliffs board of directors unanimously recommends that you vote “FOR” the Cliffs merger proposal and “FOR” the Cliffs adjournment proposal.

The Cliffs special meeting proposals are described in more detail in the accompanying joint proxy statement/prospectus, which you should read carefully in its entirety before you vote. A copy of the Merger Agreement is attached as Annex A to the accompanying joint proxy statement/prospectus.

PLEASE VOTE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE CLIFFS SPECIAL MEETING. IF YOU DESIRE AT A LATER TIME TO REVOKE OR CHANGE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS. FOR FURTHER INFORMATION CONCERNING THE PROPOSALS BEING VOTED UPON, USE OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.

 

 

				BY ORDER OF THE BOARD OF DIRECTORS,
				James D. Graham
				Executive Vice President, Chief Legal Officer & Secretary
				Cleveland-Cliffs Inc.
Cleveland, Ohio
[                ], 2020

AK STEEL HOLDING CORPORATION

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON [                ], 2020

AT [                ]

 

 

NOTICE IS HEREBY GIVEN that a special meeting of stockholders of AK Steel Holding Corporation, which is referred to as AK Steel, will be held on [                ], 2020, at [                ], Eastern Time, at [                ], which is referred to as the AK Steel special meeting, for the following purposes:

 

•

to consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of December 2, 2019, which, as such agreement may be amended from time to time, is referred to as the Merger Agreement, among Cleveland-Cliffs Inc., AK Steel and Pepper Merger Sub Inc., which is referred to as the AK Steel merger proposal;

 

•

to consider and vote on a non-binding, advisory proposal to approve the compensation that may be paid or become payable to AK Steel’s named executive officers that is based on or otherwise relates to the merger contemplated by the Merger Agreement, which is referred to as the AK Steel compensation proposal; and

 

•

to consider and vote on a proposal to adjourn the AK Steel special meeting, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the AK Steel special meeting to approve the AK Steel merger proposal, which is referred to as the AK Steel adjournment proposal.

Approval of the AK Steel merger proposal is required to complete the merger and other transactions contemplated by the Merger Agreement. AK Steel stockholders will also be asked to approve, by an advisory, non-binding vote, the AK Steel compensation proposal and, if necessary, the AK Steel adjournment proposal. AK Steel does not intend to transact any other business at the AK Steel special meeting. The record date for the AK Steel special meeting has been set as [                ], 2020. Only AK Steel stockholders of record as of the close of business on such record date are entitled to notice of, and to vote at, the AK Steel special meeting or any adjournments and postponements thereof. For additional information, see the section entitled “Special Meeting of AK Steel Stockholders” beginning on page [    ] of the joint proxy statement/prospectus accompanying this notice.

The AK Steel board of directors unanimously recommends that you vote “FOR” the AK Steel merger proposal, “FOR” the AK Steel compensation proposal and “FOR” the AK Steel adjournment proposal.

The AK Steel special meeting proposals are described in more detail in the accompanying joint proxy statement/prospectus, which you should read carefully in its entirety before you vote. A copy of the Merger Agreement is attached as Annex A to the accompanying joint proxy statement/prospectus.

PLEASE VOTE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE AK STEEL SPECIAL MEETING. IF YOU DESIRE AT A LATER TIME TO CHANGE YOUR VOTE OR REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS. FOR FURTHER INFORMATION CONCERNING THE PROPOSALS BEING VOTED UPON, HOW TO VOTE AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.

 

				BY ORDER OF THE BOARD OF DIRECTORS,
				Joseph C. Alter
				Vice President, General Counsel and Corporate Secretary
				AK Steel Holding Corporation
West Chester, Ohio
[                ], 2020

REFERENCES TO ADDITIONAL INFORMATION

This joint proxy statement/prospectus incorporates important business and financial information about Cleveland-Cliffs Inc., which is referred to as Cliffs, and AK Steel Holding Corporation, which is referred to as AK Steel, from other documents that Cliffs and AK Steel have filed with the Securities and Exchange Commission, which is referred to as the SEC, and that are not contained herein or delivered herewith. For a listing of documents incorporated by reference herein and additional information on how you can obtain copies of these documents free of charge from Cliffs or AK Steel (as applicable), please see the section entitled “Where You Can Find More Information” beginning on page [    ]. This information is also available for you to review free of charge through the SEC’s website at www.sec.gov.

This joint proxy statement/prospectus is first being mailed to Cliffs shareholders and AK Steel stockholders on or about [                ], 2020.

You may request copies of this joint proxy statement/prospectus and any of the documents incorporated by reference herein without charge upon written or oral request to the applicable company’s principal executive office. The respective addresses and telephone numbers of such principal executive offices are listed below.

 

For Cliffs Shareholders:		For AK Steel Stockholders:
Cleveland-Cliffs Inc. 200 Public Square, Suite 3300 Cleveland, OH 44114 Attention: Investor Relations 1-800-214-0739		AK Steel Holding Corporation 9227 Centre Pointe Drive West Chester, OH 45069 Attention: Investor Relations 1-513-425-5000

To obtain timely delivery of these documents before Cliffs’ special meeting of shareholders, Cliffs shareholders must request the information no later than [                ], 2020, which is five business days before the date of the Cliffs special meeting.

To obtain timely delivery of these documents before AK Steel’s special meeting of stockholders, AK Steel stockholders must request the information no later than [                ], 2020, which is five business days before the date of the AK Steel special meeting.

In addition, if you have questions about the Merger or this joint proxy statement/prospectus or would like additional copies of the joint proxy statement/prospectus, please contact the appropriate company at the contact listed above. You will not be charged for any of the documents that you request.

If you have any questions about the Cliffs special meeting or the AK Steel special meeting, or need to obtain proxy cards or other information related to the proxy solicitation, please contact the applicable company’s proxy solicitor set forth below:

 

CLIFFS PROXY SOLICITOR		AK STEEL PROXY SOLICITOR
Okapi Partners LLC 1212 Avenue of the Americas, 24th Floor New York, New York 10036   Banks and brokers call: +1-212-297-0720 Shareholders and all others call toll-free: + 1-877-869-0171 Email: info@okapipartners.com		Georgeson LLC 1290 Avenue of the Americas, 9th Floor New York, New York 10104   Toll-free: +1-866-413-5899

ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS

This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the SEC by Cliffs (Registration No. 333-235855), constitutes a prospectus of Cliffs under Section 5 of the Securities Act of 1933, as amended, which is referred to as the Securities Act, with respect to the common shares, par value $0.125 per share, of Cliffs, which are referred to as Cliffs common shares, to be issued to AK Steel stockholders pursuant to the Agreement and Plan of Merger, dated as of December 2, 2019, which, as such agreement may be amended from time to time, is referred to as the Merger Agreement, among Cliffs, AK Steel and Pepper Merger Sub Inc., which is referred to as Merger Sub, providing for Cliffs’ acquisition of AK Steel by way of the merger of Merger Sub with and into AK Steel, with AK Steel continuing as the surviving corporation and as a direct, wholly owned subsidiary of Cliffs, which is referred to as the Merger. This document also constitutes a proxy statement of each of Cliffs and AK Steel under Section 14(a) of the Securities Exchange Act of 1934, as amended, which is referred to as the Exchange Act.

Cliffs has supplied all information contained in or incorporated by reference herein relating to Cliffs and Merger Sub, and AK Steel has supplied all information contained in or incorporated by reference herein relating to AK Steel. Cliffs and AK Steel have both contributed to the information relating to the Merger Agreement and related transactions contained in this joint proxy statement/prospectus.

You should rely only on the information contained in or incorporated by reference herein in connection with any vote, the giving or withholding of any proxy, or any investment decision in connection with the Merger. Cliffs and AK Steel have not authorized anyone to provide you with information that is different from that contained in or incorporated by reference herein. This joint proxy statement/prospectus is dated [                ], 2020, and you should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than such date unless otherwise specifically provided herein. Further, you should not assume that the information incorporated by reference herein is accurate as of any date other than the date of the incorporated document. Neither the mailing of this joint proxy statement/prospectus to Cliffs shareholders or AK Steel stockholders nor the issuance of Cliffs common shares pursuant to the Merger Agreement will create any implication to the contrary.

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

TABLE OF CONTENTS

 

		Page
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS			1
SUMMARY			16
Information About the Companies			16
The Merger and the Merger Agreement			17
Recommendation of the Cliffs Board			17
Recommendation of the AK Steel Board			17
Opinions of Financial Advisors			17
Special Meeting of Cliffs Shareholders			18
Special Meeting of AK Steel Stockholders			19
Directors of Cliffs Following the Merger			21
Interests of AK Steel Directors and Executive Officers in the Merger			21
Conditions to the Completion of the Merger			21
No-Solicitation by Cliffs or AK Steel			23
Changes of Recommendation			24
Termination			26
Termination Fees			28
Regulatory Approvals			29
Litigation Relating to the Merger			30
No Appraisal Rights			30
Material U.S. Federal Income Tax Consequences of the Merger			30
Comparison of Stockholders’ and Shareholders’ Rights			31
Selected Historical Consolidated Financial Data of Cliffs			32
Selected Historical Consolidated Financial Data of AK Steel			35
Selected Unaudited Pro Forma Condensed Combined Financial Data			37
Comparative Historical and Unaudited Pro Forma Per Share Financial Data			39
Market and Dividend Information; Implied Value of Merger Consideration			41
RISK FACTORS			43
Risks Relating to the Merger			43
Risks Relating to Cliffs’ Business			53
Risks Relating to AK Steel’s Business			53
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS			54
INFORMATION ABOUT THE COMPANIES			56
SPECIAL MEETING OF CLIFFS SHAREHOLDERS			57
CLIFFS PROPOSALS			62
Cliffs Merger Proposal			62
Cliffs Adjournment Proposal			62
SPECIAL MEETING OF AK STEEL STOCKHOLDERS			63
AK STEEL PROPOSALS			68
AK Steel Merger Proposal			68
AK Steel Compensation Proposal			68
AK Steel Adjournment Proposal			69
THE MERGER			70
Transaction Structure			70
Consideration to AK Steel Stockholders			70
Background of the Merger			70
Recommendation of the Cliffs Board and Reasons for the Merger			82
Opinion of Moelis, Cliffs’ Financial Advisor			85
Recommendation of the AK Steel Board and Reasons for the Merger			100
Opinion of Goldman Sachs, AK Steel’s Financial Advisor			104
Unaudited Forecasted Financial Information			112

 

-i-

TABLE OF CONTENTS

(continued)

 

		Page
Funding of the Merger Expenses and Indebtedness Following the Merger			121
Regulatory Approvals			121
Litigation Relating to the Merger			122
Appraisal Rights			122
Directors of Cliffs Following the Merger			122
Interests of AK Steel Directors and Executive Officers in the Merger			122
Indemnification and Insurance			130
Listing of Cliffs Shares; Delisting and Deregistration of AK Steel Shares			131
Accounting Treatment of the Merger			131
THE MERGER AGREEMENT			132
Explanatory Note Regarding the Merger Agreement			132
The Merger			132
Closing and Effective Time of the Merger			132
Merger Consideration			133
Treatment of Outstanding AK Steel Equity Awards in the Merger			133
Exchange Procedures			135
Termination of the Exchange Fund			136
Lost, Stolen or Destroyed Share Certificates			136
Adjustments to Prevent Dilution			136
Dividends and Distributions on Cliffs Common Shares			136
Withholdings			137
No Appraisal Rights			137
Organizational Documents; Directors and Officers			137
NYSE Listing; De-listing			138
Representations and Warranties			138
Interim Operations of AK Steel and Cliffs Pending the Merger			141
No-Solicitation of Acquisition Proposals; Changes of Recommendation			146
Special Meetings			153
Reasonable Best Efforts; Regulatory Filings and Other Actions			154
Employee Matters			156
Transaction Litigation			158
Access and Reports			158
Tax Treatment			158
Financing			159
Conditions to the Completion of the Merger			159
Termination			161
Expenses			164
Indemnification; Directors’ and Officers’ Insurance			164
Modification and Amendment; Waivers			165
Remedies			165
Governing Law			165
Jury Trial Waiver			165
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER			166
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS			169
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS			174
DIRECTORS OF CLIFFS FOLLOWING THE MERGER			185
COMPARISON OF STOCKHOLDERS’ AND SHAREHOLDERS’ RIGHTS			186
APPRAISAL RIGHTS			201

 

-ii-

TABLE OF CONTENTS

(continued)

 

		Page
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND DIRECTORS/EXECUTIVE OFFICERS OF CLIFFS			202
Security Ownership of Directors and Executive Officers			202
Security Ownership of Other Beneficial Owners			203
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND DIRECTORS/EXECUTIVE OFFICERS OF AK STEEL			204
Security Ownership of Directors and Executive Officers			204
Security Ownership of Other Beneficial Owners			205
VALIDITY OF COMMON SHARES			206
TAX OPINION			207
EXPERTS			208
Cliffs			208
AK Steel			208
SHAREHOLDER AND STOCKHOLDER PROPOSALS			209
Cliffs Shareholder Proposals			209
AK Steel Stockholder Proposals			209
HOUSEHOLDING OF PROXY MATERIALS			211
Cliffs Householding			211
AK Steel Householding			211
WHERE YOU CAN FIND MORE INFORMATION			212
Annex A: Agreement and Plan of Merger
Annex B: Opinion of Moelis & Company LLC
Annex C: Opinion of Goldman Sachs & Co. LLC

 

-iii-

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS

The following are answers to certain questions that you may have regarding the Merger and the Cliffs and AK Steel special meetings. Cliffs and AK Steel urge you to read carefully the remainder of this document because the information in this section may not provide all the information that might be important to you in determining how to vote. Additional important information is also contained in the annexes to, and the documents incorporated by reference in, this document. See “References to Additional Information” at the beginning of this document.

 

Q.	Why am I receiving this joint proxy statement/prospectus?

 

A.

You, as a Cliffs shareholder or an AK Steel stockholder, are receiving this joint proxy statement/prospectus because Cliffs and AK Steel have entered into the Merger Agreement pursuant to which, on the terms and subject to the conditions included in the Merger Agreement, Merger Sub will merge with and into AK Steel, with AK Steel surviving the Merger as a direct, wholly owned subsidiary of Cliffs. Your vote is required in connection with the Merger. The Merger Agreement, which governs the terms of the Merger, is attached to this joint proxy statement/prospectus as Annex A.

Cliffs. Completion of the Merger requires that the Merger Agreement and the transactions contemplated thereby, including the issuance of Cliffs common shares in connection with the Merger, be approved by the shareholders of Cliffs in accordance with the rules of the NYSE and the Ohio Revised Code, which is referred to as the ORC. Cliffs is holding a special meeting of its shareholders, which is referred to as the Cliffs special meeting, to obtain that approval. If necessary or appropriate, Cliffs shareholders will also be asked to approve the adjournment of the Cliffs special meeting to solicit additional proxies in the event there are not sufficient votes at the time of the Cliffs special meeting to approve the Merger Agreement and the transactions contemplated by the Merger Agreement, including the issuance of Cliffs common shares in connection with the Merger.

AK Steel. Completion of the Merger requires that the Merger Agreement be adopted by AK Steel stockholders in accordance with the General Corporation Law of the State of Delaware, which is referred to as the DGCL. AK Steel is holding a special meeting of its stockholders, which is referred to as the AK Steel special meeting, to obtain that approval. At the AK Steel special meeting, AK Steel stockholders will also be asked to vote on the AK Steel compensation proposal, as defined below, and, if necessary or appropriate, a proposal to adjourn the AK Steel special meeting to solicit additional proxies in the event there are not sufficient votes at the time of the meeting to adopt the Merger Agreement.

 

Q:	When and where will the special meetings take place?

 

A:	Cliffs. The Cliffs special meeting will be held at [                ] Eastern Time on [                 ], 2020, at [                ].

 

AK Steel. The AK Steel special meeting will be held at [                ] Eastern Time on [                ], 2020, at [                ].

 

Q:	What matters will be considered at the special meetings?

 

A:	Cliffs. Cliffs shareholders will be asked to:

 

•

consider and vote on a proposal to approve the Merger Agreement and the transactions contemplated by the Merger Agreement, including the issuance of Cliffs common shares in connection with the Merger, which is referred to as the Cliffs merger proposal; and

 

•

consider and vote on a proposal to adjourn the Cliffs special meeting, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the Cliffs special meeting to approve the Cliffs merger proposal, which is referred to as the Cliffs adjournment proposal.

 

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AK Steel. AK Steel stockholders will be asked to:

 

•

consider and vote on a proposal to adopt the Merger Agreement, which is referred to as the AK Steel merger proposal;

 

•

consider and vote on a proposal to approve, by a non-binding, advisory vote, certain compensation that may be paid or become payable to AK Steel’s named executive officers that is based on or otherwise relates to the Merger, which is referred to as the AK Steel compensation proposal; and

 

•

consider and vote on a proposal to adjourn the AK Steel special meeting, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the AK Steel special meeting to approve the AK Steel merger proposal, which is referred to as the AK Steel adjournment proposal.

 

Q:	Is my vote important?

 

A:

Cliffs. Yes. The Merger cannot be completed unless the Cliffs merger proposal is approved by the affirmative vote of the holders of Cliffs common shares entitling them to exercise a majority of the voting power of Cliffs on the proposal. Only Cliffs shareholders as of the close of business on [                ], 2020, which is referred to as the record date, are entitled to vote at the Cliffs special meeting. The Cliffs board of directors, which is referred to as the Cliffs board, unanimously recommends that Cliffs shareholders vote “FOR” the approval of the Cliffs merger proposal and “FOR” the approval of the Cliffs adjournment proposal.

AK Steel. Yes. The Merger cannot be completed unless the Merger Agreement is adopted by AK Steel stockholders representing a majority of the outstanding shares of common stock, par value $0.01 per share, of AK Steel, which is referred to as AK Steel common stock, entitled to vote thereon at the AK Steel special meeting. Only AK Steel stockholders as of the close of business on the record date are entitled to vote at the AK Steel special meeting.

The board of directors of AK Steel, which is referred to as the AK Steel board, unanimously recommends that AK Steel stockholders vote “FOR” the approval of the AK Steel merger proposal, “FOR” the approval of the AK Steel compensation proposal and “FOR” the approval of the AK Steel adjournment proposal.

 

Q:	If my Cliffs common shares or my shares of AK Steel common stock are held in “street name” by my bank, broker or other nominee, will my bank, broker or other nominee automatically vote those shares for me?

 

A:	No. If you hold your shares in a stock brokerage account or if your shares are held by a bank or nominee, your bank, broker or other nominee cannot vote your shares on any of the proposals at the Cliffs special meeting or AK Steel special meeting without instructions from you.

Under the NYSE rules, brokers who hold shares in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, brokers are not allowed to exercise their voting discretion with respect to the approval of matters that the NYSE determines to be “non-routine.” Under the NYSE rules, brokers are not permitted to vote on any of the matters to be considered at the Cliffs special meeting or the AK Steel special meeting unless they have received instructions from the beneficial owners. As a result, your shares will not be voted on any matter unless you affirmatively instruct your broker, bank or nominee how to vote your shares in one of the ways indicated by your broker, bank or other nominee.

A “broker non-vote” occurs when a broker submits a proxy that states that the broker does not vote for some of the proposals because the broker has not received instructions from the beneficial owners on how to vote on the proposals and does not have discretionary authority to vote in the absence of instructions. Because brokers will not have discretionary authority to vote on any of the proposals at the special meetings, no “broker non-votes” can occur at the Cliffs special meeting or AK Steel special meeting.

 

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Q:	What Cliffs shareholder vote is required for the approval of each proposal brought before the Cliffs special meeting? What will happen if I fail to vote or abstain from voting on each proposal?

 

A:

The Cliffs merger proposal. Approval of the Cliffs merger proposal requires the affirmative vote of the holders of Cliffs common shares entitling them to exercise a majority of the voting power of Cliffs on the proposal. The failure to submit a proxy card or to vote in person at the Cliffs special meeting or the abstention from voting by Cliffs shareholders, or the failure of any Cliffs shareholder who holds shares in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee with respect to the Cliffs merger proposal, will have the same effect as a vote “AGAINST” the Cliffs merger proposal.

The Cliffs adjournment proposal. Approval of the Cliffs adjournment proposal requires the affirmative vote of the holders of a majority of the Cliffs common shares present in person or represented by proxy at the Cliffs special meeting, whether or not a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the Cliffs adjournment proposal, while the failure to submit a proxy card or to vote in person at the Cliffs special meeting, or the failure of any Cliffs shareholder who holds shares in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee on the Cliffs merger proposal and the Cliffs adjournment proposal, will have no effect on the Cliffs adjournment proposal.

 

Q:	What vote is required for AK Steel stockholders to approve each proposal brought before the AK Steel special meeting? What will happen if I fail to vote or abstain from voting on each proposal?

 

A:

The AK Steel merger proposal. Approval of the AK Steel merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of AK Steel common stock entitled to vote on the proposal. If you fail to vote, or vote to abstain, it will have the same effect as a vote “AGAINST” the proposal. The failure of any AK Steel stockholder who holds shares in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee with respect to the AK Steel merger proposal will have the same effect as a vote “AGAINST” the AK Steel merger proposal.

The AK Steel compensation proposal. Approval of the AK Steel compensation proposal requires the affirmative vote of a majority of the shares of AK Steel common stock present in person or represented by proxy at the AK Steel special meeting and entitled to vote on the proposal. Abstentions will have the same effect as a vote “AGAINST” the AK Steel compensation proposal, while the failure to submit a proxy card or to vote in person at the AK Steel special meeting, or the failure of any AK Steel stockholder who holds their shares in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee with respect to all of the AK Steel proposals, will have no effect on the AK Steel compensation proposal, assuming a quorum is present at the AK Steel special meeting.

The AK Steel adjournment proposal. Approval of the AK Steel adjournment proposal requires the affirmative vote of a majority of the shares of AK Steel common stock present in person or represented by proxy at the AK Steel special meeting and entitled to vote on the proposal, whether or not a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the AK Steel adjournment proposal, while the failure to submit a proxy card or to vote in person at the AK Steel special meeting, or the failure of any AK Steel stockholder who holds their shares in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee with respect to all of the AK Steel proposals, will have no effect on the AK Steel adjournment proposal.

 

Q:	What will AK Steel stockholders receive if the Merger is completed?

 

A:

As a result of the Merger, each share of AK Steel common stock issued and outstanding immediately prior to the effective time of the Merger (other than excluded shares, as defined in the section entitled “The Merger—Consideration to AK Steel Stockholders” beginning on page [    ]) will be converted into the right

 

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to receive 0.400 Cliffs common shares, which is referred to as the merger consideration, and such ratio is referred to as the exchange ratio.

If you would otherwise be entitled to receive a fractional Cliffs common share you will receive cash in lieu of such fractional share, and you will not be entitled to dividends, voting rights or any other rights in respect of such fractional share.

For more information regarding the merger consideration to be provided to AK Steel stockholders, see the section entitled “The Merger—Consideration to AK Steel Stockholders” beginning on page [    ]. For more information regarding exchange procedures, see the section entitled “The Merger Agreement—Exchange Procedures” beginning on page [    ].

 

Q:	What will holders of AK Steel equity awards receive in the Merger?

 

A:

At the effective time of the Merger, each outstanding AK Steel equity award (other than any cash-out options, as described below and in the section entitled “The Merger Agreement—Treatment of Outstanding AK Steel Equity Awards in the Merger” beginning on page [    ]) will be converted into equity awards with respect to Cliffs common shares.

AK Steel Options

Holders of options to purchase AK Steel common stock that were granted under an AK Steel stock incentive plan other than the AK Steel Holding Corporation 2019 Omnibus Supplemental Incentive Plan and the AK Steel Holding Corporation Stock Incentive Plan (as amended and restated as of May 26, 2016), which are referred to as pre-2016 options, will have the right, no later than one day prior to the date of the closing of the Merger, to elect to have their pre-2016 options, whether vested or unvested, cancelled in exchange for a cash payment (without interest and less applicable withholding taxes) in an amount equal to the product of (i) the number of shares of AK Steel common stock subject to such pre-2016 option as of immediately prior to the effective time of the Merger and (ii) the excess, if any, of the per share option consideration (as described below) over the exercise price per share of AK Steel common stock subject to such pre-2016 option, which cash amount is referred to as the cash-out option payment. For purposes of the Merger Agreement, the per share option consideration means the greater of (x) the product of the exchange ratio multiplied by the volume weighted average trading price per Cliffs common share for the five consecutive trading days ending with, and including, the trading day immediately prior to the closing date, or (y) the highest average of the highest and lowest sales price per share of AK Steel common stock on a trading day during the 90-day period ending on the day immediately prior to the closing date. Each pre-2016 option for which a holder makes an election described in this paragraph is referred to as a cash-out option.

At the effective time of the Merger, each outstanding option to purchase AK Steel common stock that is not a cash-out option, whether vested or unvested, will, automatically and without any action on the part of the holder thereof, be converted into an option to acquire a number of Cliffs common shares (rounded down to the nearest whole number) equal to (i) the number of shares of AK Steel common stock subject to such AK Steel option immediately prior to the effective time of the Merger multiplied by (ii) the exchange ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (x) the exercise price per share of AK Steel common stock of such AK Steel option immediately prior to the effective time of the Merger divided by (y) the exchange ratio. Following the effective time of the Merger, each such converted option will, in general, continue to be governed by the same terms and conditions (including vesting terms and double-trigger termination protection) as were applicable to such AK Steel option immediately prior to the effective time of the Merger.

AK Steel Restricted Stock Units

At the effective time of the Merger, each outstanding restricted stock unit in respect of AK Steel common stock with only time-based vesting requirements, which is referred to as an AK Steel RSU, whether vested

 

- 4 -

or unvested, will, automatically and without any action on the part of the holder thereof, be converted into a restricted stock unit denominated in Cliffs common shares relating to the number of Cliffs common shares (rounded down to the nearest whole number) equal to (i) the number of shares of AK Steel common stock subject to such AK Steel RSU immediately prior to the effective time of the Merger multiplied by (ii) the exchange ratio. Following the effective time of the Merger, each such restricted stock unit will, in general, continue to be governed by the same terms and conditions (including vesting terms and double-trigger termination protection) as were applicable to such AK Steel RSU immediately prior to the effective time of the Merger.

AK Steel Performance Share Awards

At the effective time of the Merger, each outstanding performance share award in respect of AK Steel common stock with any performance-based vesting requirements, which is referred to as an AK Steel PSA, will, automatically and without any action on the part of the holder thereof, be converted into a performance share award denominated in Cliffs common shares relating to the number of Cliffs common shares (rounded down to the nearest whole number) equal to (i) the number of shares of AK Steel common stock that would have been issued under such AK Steel PSA at the achievement of target performance, multiplied by (ii) the exchange ratio. The performance goals applicable to each AK Steel PSA will be adjusted by the Management Development and Compensation Committee of the AK Steel board, as mutually determined by Cliffs and AK Steel, to take into account the transactions contemplated by the Merger Agreement, which shall include the same opportunity to earn the maximum percentage of performance shares as under the AK Steel PSA award agreement immediately prior to the effective time of the Merger. Following the effective time of the Merger, each such performance share award will, in general, continue to be governed by the same terms and conditions (including vesting terms and double-trigger termination protection) as were applicable to such AK Steel PSA immediately prior to the effective time of the Merger.

AK Steel Restricted Shares

At the effective time of the Merger, each outstanding share of AK Steel common stock that is subject to vesting, repurchase, or other lapse restrictions, which is referred to as an AK Steel restricted share, will, automatically and without any action on the part of the holder thereof, be converted into restricted shares denominated in Cliffs common shares relating to the number of Cliffs common shares (rounded down to the nearest whole number) equal to (i) the number of AK Steel restricted shares held by a holder, multiplied by (ii) the exchange ratio. Following the effective time of the Merger, each such restricted share will, in general, continue to be governed by the same terms and conditions (including vesting terms and double-trigger termination protection) as were applicable to such AK Steel restricted share immediately prior to the effective time of the Merger.

 

Q:	How do the boards of directors of Cliffs and AK Steel recommend that I vote?

 

A:

Cliffs. The Cliffs board recommends that Cliffs shareholders vote “FOR” the approval of the Cliffs merger proposal and “FOR” the approval of the Cliffs adjournment proposal. For more information regarding how the Cliffs board recommends that Cliffs shareholders vote, see the section entitled “The Merger—Recommendation of the Cliffs Board and Reasons for the Merger” beginning on page [    ].

AK Steel. The AK Steel board recommends that you vote “FOR” the approval of the AK Steel merger proposal, “FOR” the approval of the AK Steel compensation proposal and “FOR” the approval of the AK Steel adjournment proposal. For more information regarding how the AK Steel board recommends that you vote, see the section entitled “The Merger—Recommendation of the AK Steel Board and Reasons for the Merger” beginning on page [    ].

 

- 5 -

Q:	Why are AK Steel stockholders being asked to vote on certain named executive officer compensation arrangements?

 

A:

The SEC has adopted rules that require AK Steel to provide its stockholders with the opportunity to approve the compensation that may be paid or become payable to AK Steel’s named executive officers that is based on, or otherwise relates to, the Merger. The AK Steel compensation proposal is a non-binding, advisory vote. For further information on these arrangements and the potential payments, see the sections entitled “The Merger—Interests of AK Steel Directors and Executive Officers in the Merger” and “The Merger—Interests of AK Steel Directors and Executive Officers in the Merger—Merger-Related Compensation for AK Steel’s Named Executive Officers” beginning on pages [    ] and [    ], respectively.

 

Q:	Who is entitled to vote at the special meeting?

 

A:

Cliffs special meeting. The Cliffs board has fixed [                 ], 2020 as the record date for the Cliffs special meeting. All holders of record of Cliffs common shares as of the close of business on the record date are entitled to receive notice of, and to vote at, the Cliffs special meeting, provided that those shares remain outstanding on the date of the Cliffs special meeting. Physical attendance at the Cliffs special meeting is not required to vote. See the section entitled “Questions and Answers About the Merger and the Special Meetings—How can I vote my shares without attending the special meeting?” beginning on page [    ] for instructions on how to vote your shares without attending the Cliffs special meeting.

AK Steel special meeting. The AK Steel board has fixed [                 ], 2020 as the record date for the AK Steel special meeting. All holders of record of shares of AK Steel common stock as of the close of business on the record date are entitled to receive notice of, and to vote at, the AK Steel special meeting. Physical attendance at the AK Steel special meeting is not required to vote. See the section entitled “Questions and Answers About the Merger and the Special Meetings—How can I vote my shares without attending the special meeting?” beginning on page [    ] for instructions on how to vote your shares without attending the AK Steel special meeting.

 

Q:	What if my shares are held in an AK Steel Corporation Thrift Plan?

 

A:

If you hold shares of AK Steel common stock in an AK Steel stock fund through certain AK Steel thrift plans, including the AK Steel Corporation Thrift Plan A, AK Steel Corporation Thrift Plan B and AK Steel Corporation Thrift Plan C, which are collectively referred to as the AK Steel thrift plans, you must timely provide the applicable AK Steel thrift plan trustee with voting instructions with respect to the shares you hold in such AK Steel thrift plan. If you do not provide the AK Steel thrift plan trustee with voting instructions, neither the AK Steel thrift plan trustee nor the applicable fiduciary committee for such AK Steel thrift plan will be able to vote the shares of AK Steel common stock held for your benefit through such AK Steel thrift plan at the AK Steel special meeting.

 

Q:	What is a proxy?

 

A:	A proxy is a legal authorization of another person to vote the stock you own on your behalf.

Cliffs shareholders. If you are a shareholder of record of Cliffs common shares as of the close of business on the record date, and you vote via the Internet, by telephone or by signing, dating and returning your proxy card in the enclosed postage-paid envelope, you designate certain of Cliffs’ officers as your proxies at the Cliffs special meeting. Each such officer will have the power to act on your behalf to vote your shares at the Cliffs special meeting as directed in your proxy. If you submit an executed proxy without indicating instructions with respect to any proposal, then such officers will vote your shares consistent with the recommendation of the Cliffs board on such proposal.

AK Steel stockholders. If you are a stockholder of record of AK Steel common stock as of the close of business on the record date, and you vote via the Internet, by telephone or by signing, dating and returning

 

- 6 -

your proxy card in the enclosed postage-paid envelope, you designate certain of AK Steel’s officers as your proxies at the AK Steel special meeting. Each such officer will have the power to act on your behalf to vote your shares at the AK Steel special meeting as directed in your proxy. If you submit an executed proxy without indicating instructions with respect to any proposal, then such officers will vote your shares consistent with the recommendation of the AK Steel board on such proposal.

 

Q:	How many votes do I have?

 

A:	Cliffs shareholders. Each Cliffs shareholder of record is entitled to one vote for each Cliffs common share held of record by him or her as of the close of business on the record date.

AK Steel stockholders. Each AK Steel stockholder of record is entitled to one vote for each share of AK Steel common stock held of record by him or her as of the close of business on the record date.

 

Q:	What constitutes a quorum for the special meeting?

 

A:	A quorum is the minimum number of shares required to be represented, either by the appearance of the stockholder or shareholder in person or through representation by proxy, to hold a valid meeting.

Quorum for Cliffs special meeting. A quorum will exist at the Cliffs special meeting if shares representing not less than a majority of the voting power of Cliffs are present, in person or represented by proxy, with respect to any matter to be considered at the Cliffs special meeting. All shares represented by proxy are counted as present for purposes of establishing a quorum, including abstentions. Cliffs common shares held in “street name” will be counted as present for the purpose of determining the existence of a quorum at the Cliffs special meeting so long as the beneficial owner of the shares has given its bank, broker or other nominee voting instructions on at least one of the proposals brought before the Cliffs special meeting. The proposals for consideration at the Cliffs special meeting are considered “non-routine” matters under NYSE Rule 452, and, therefore, no “broker non-votes” can occur at the meeting. Cliffs common shares held in “street name” will not be counted as present for the purpose of determining the existence of a quorum if no instructions have been provided on how to vote on either of the proposals.

Quorum for AK Steel special meeting. A quorum will exist with respect to each matter to be considered at the AK Steel special meeting if holders of record of shares of AK Steel common stock representing not less than a majority of the issued and outstanding shares of AK Steel common stock entitled to vote at the AK Steel special meeting are present in person or represented by proxy. Shares of AK Steel common stock held in “street name” will be counted as present for the purpose of determining the existence of a quorum at the AK Steel special meeting so long as a stockholder has given the bank, broker or other nominee voting instructions on at least one of the proposals brought before the AK Steel special meeting. The proposals for consideration at the AK Steel special meeting are considered “non-routine” matters under NYSE Rule 452, and, therefore, banks, brokers and other nominees cannot vote any shares unless they have received instructions on how to vote the shares. As a result, no “broker non-votes” can occur at the meeting and shares of AK Steel common stock held in “street name” will not be counted as present for the purpose of determining the existence of a quorum at the AK Steel special meeting if no instructions have been provided on how to vote on any such proposals.

 

Q:	What will happen to AK Steel as a result of the Merger?

 

A:

If the Merger is completed, Merger Sub will merge with and into AK Steel. As a result of the Merger, the separate corporate existence of Merger Sub will cease and AK Steel will continue as the surviving corporation and as a direct, wholly owned subsidiary of Cliffs. Further, if the Merger is completed, AK Steel will no longer be a public company, and the AK Steel common stock will be de-listed from the NYSE.

 

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Q:	I own shares of AK Steel common stock. What will happen to those shares as a result of the Merger?

 

A:

If the Merger is completed, each of your shares of AK Steel common stock will be cancelled and thereafter represent only the right to receive, on the terms and subject to the conditions set forth in the Merger Agreement, the merger consideration as well as cash in lieu of any fractional Cliffs common shares and any dividends or distributions on the Cliffs common shares with a record date at or after the effective time of the Merger. See the section entitled “The Merger Agreement—Merger Consideration” beginning on page [    ].

 

Q:	Where will the Cliffs common shares that AK Steel stockholders receive in the Merger be publicly listed and traded?

 

A:	The Cliffs common shares issued to AK Steel stockholders in connection with the Merger will be listed and traded on the NYSE under the ticker symbol, “CLF.”

 

Q:	What happens if the Merger is not completed?

 

A:

If the Merger Agreement and the transactions contemplated by the Merger Agreement, including the issuance of Cliffs common shares in connection with the Merger, is not approved by Cliffs shareholders or if the Merger Agreement is not adopted by AK Steel stockholders, or if the Merger is not completed for any other reason, AK Steel stockholders will not receive the merger consideration or any other consideration in connection with the Merger, and their shares of AK Steel common stock will remain outstanding.

If the Merger is not completed, AK Steel will remain an independent public company and its common stock will continue to be listed and traded on the NYSE. If the Merger is not completed, Cliffs will not issue Cliffs common shares to AK Steel stockholders pursuant to the Merger Agreement, regardless of whether the Cliffs merger proposal is approved. If the Merger Agreement is terminated under specified circumstances, either AK Steel or Cliffs (depending on the circumstances) may be required to pay the other party a termination fee. See “The Merger Agreement—Termination” beginning on page [    ] for a more detailed discussion of the termination fees.

 

Q:	How can I vote my shares in person at the special meeting?

 

A:

Cliffs. Cliffs common shares held directly in your name as the shareholder of record of such Cliffs common shares as of the close of business on [                 ], 2020, the record date, may be voted in person at the Cliffs special meeting. If you choose to attend the Cliffs special meeting, you will need to bring valid, government-issued photo identification.

If you are a beneficial owner of Cliffs common shares but not the shareholder of record of such Cliffs common shares, you will also need proof of stock ownership to be admitted to the Cliffs special meeting. A recent brokerage statement or a letter from a bank or broker are examples of proof of ownership. Please note that if your shares are held in “street name” by a bank, broker or other nominee and you wish to vote at the Cliffs special meeting, you will not be permitted to vote in person unless you first obtain a legal proxy issued in your name from the record owner and present it to the inspector of election with your ballot at the Cliffs special meeting. To request a legal proxy, please contact your bank, broker or other nominee holder of record. It is suggested you do so in a timely manner to ensure receipt of your legal proxy prior to the Cliffs special meeting.

Failure to bring the appropriate documentation may delay your entry into or prevent you from attending or voting in person at the Cliffs special meeting. The doors to the meeting room will be closed promptly at the start of the Cliffs special meeting, and shareholders will not be permitted to enter after that time.

AK Steel. Shares of AK Steel common stock held directly in your name as the stockholder of record as of the close of business on [                 ], 2020, the record date, may be voted in person at the AK Steel special meeting. If you choose to attend the AK Steel special meeting, you will need to bring valid, government-issued photo identification.

 

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If you are a beneficial owner of AK Steel common stock but not the stockholder of record of such shares (for example, if your shares are held in “street name” by a bank, broker or other nominee) you will also need proof of stock ownership to be admitted to the AK Steel special meeting. A recent brokerage statement or a letter from a bank or broker are examples of proof of ownership. If you wish to vote at the AK Steel special meeting, you will not be permitted to vote in person unless you first obtain a legal proxy issued in your name from the record owner and present it to the inspector of election with your ballot at the AK Steel special meeting. To request a legal proxy please contact your bank, broker or other nominee holder of record. It is suggested you do so in a timely manner to ensure receipt of your legal proxy prior to the AK Steel special meeting.

Failure to bring the appropriate documentation may delay your entry into or prevent you from attending or voting in person at the AK Steel special meeting.

 

Q:	How can I vote my shares without attending the special meeting?

 

A:

Cliffs. If you are a shareholder of record of Cliffs common shares as of the close of business on [                 ], 2020, the record date, you can vote by proxy via the Internet, by telephone or by mail by following the instructions provided on the enclosed proxy card. If your Cliffs common shares are held in “street name,” you may vote by following the voting instructions provided by your bank, broker or other nominee. Internet and telephone voting may be available to beneficial owners of Cliffs common shares. Please refer to the voting instruction form provided by your bank, broker or other nominee.

AK Steel. If you are a stockholder of record of AK Steel common stock as of the close of business on [                ], 2020, the record date, you can vote by proxy via the Internet, by telephone or by mail by following the instructions provided on the enclosed proxy card.

If your shares of AK Steel common stock are held in “street name,” you may vote by following the voting instructions provided by your bank, broker or other nominee. Internet and telephone voting may be available to beneficial owners of AK Steel common stock. Please refer to the voting instruction form provided by your bank, broker or other nominee.

 

Q:	What is the difference between holding shares as a record owner and as a beneficial owner?

 

A:

Cliffs. If your Cliffs common shares are registered directly in your name with Cliffs’ transfer agent, Broadridge Corporate Issuer Solutions, you are considered the shareholder of record with respect to those shares, and access to proxy materials is being provided directly to you. If your shares are held by a bank, in a stock brokerage account or by another nominee, then you are considered the beneficial owner of those shares, which are considered to be held in “street name.” Access to proxy materials is being provided to you by your bank, broker or other nominee who is considered the shareholder of record with respect to those shares.

AK Steel. If your shares of AK Steel common stock are registered directly in your name with AK Steel’s transfer agent, Computershare, you are considered the stockholder of record with respect to those shares, and access to proxy materials is being provided directly to you. If your shares are held by a bank, in a stock brokerage account or by another nominee, then you are considered the beneficial owner of those shares, which are considered to be held in “street name.” Access to proxy materials is being provided to you by your bank, broker or other nominee who is considered the stockholder of record with respect to those shares.

 

Q:	I hold Cliffs common shares and shares of AK Steel common stock. Do I need to vote separately for each company?

 

A:

Yes. Cliffs and AK Steel will hold separate meetings and their shareholders and stockholders, respectively, are being asked to vote on different matters. You will need to separately follow the applicable procedures described in this joint proxy statement/prospectus both with respect to the voting of Cliffs common shares and with respect to the voting of shares of AK Steel common stock in order to effectively vote the shares of common stock you hold in each company.

 

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Q:	What should I do if I receive more than one set of voting materials?

 

A:

You may receive more than one set of voting materials relating to the Cliffs special meeting or the AK Steel special meeting if you hold Cliffs common shares or shares of AK Steel common stock in “street name” and also directly in your name as a shareholder or stockholder of record or otherwise or if you hold Cliffs common shares or shares of AK Steel common stock in more than one brokerage account. You may also receive more than one set of materials if you hold shares of both Cliffs and AK Steel.

Direct holders (Cliffs shareholders of record or AK Steel stockholders of record)

For Cliffs common shares or shares of AK Steel common stock held directly, please complete, sign, date and return each proxy card that you receive (or cast your vote via the Internet or by telephone as provided on each proxy card) or otherwise follow the voting instructions provided in this joint proxy statement/prospectus in order to ensure that all of your Cliffs common shares and/or shares of AK Steel common stock are voted.

Shares in “street name”

For Cliffs common shares or shares of AK Steel common stock held in “street name” through a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee to vote your shares.

 

Q:	If a Cliffs shareholder or an AK Steel stockholder gives a proxy, how will the Cliffs common shares or shares of AK Steel common stock, as applicable, covered by the proxy be voted?

 

A:

If you provide a proxy, regardless of whether you provide that proxy via the Internet, by telephone or by completing and returning the applicable enclosed proxy card, the individuals named on the enclosed proxy card will vote the Cliffs common shares or the shares of AK Steel common stock, as applicable, represented by the proxy in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your Cliffs common shares or your shares of AK Steel common stock, as applicable, should be voted for or against (or to abstain from voting on) all, some or none of the specific items of business to come before the Cliffs special meeting or the AK Steel special meeting, as applicable.

 

Q:	How will my shares be voted if I return a blank proxy?

 

A:	Cliffs. If you sign, date and return your proxy and do not indicate how you want your Cliffs common shares to be voted, then your Cliffs common shares will be voted in accordance with the recommendation of the Cliffs board.

AK Steel. If you sign, date and return your proxy and do not indicate how you want your shares of AK Steel common stock to be voted, then your shares of AK Steel common stock will be voted in accordance with the recommendation of the AK Steel board.

 

Q:	Can I change my vote after I have submitted my proxy?

 

A:	Cliffs. Yes. If you are a shareholder of record of Cliffs common shares as of the close of business on the record date, whether you vote via the Internet, by telephone or mail, you can change or revoke your proxy before it is voted at the Cliffs special meeting in any of the following ways:

 

•

you can submit a new proxy card bearing a later date;

 

•

you can vote again via the Internet or by telephone at a later time;

 

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•

you can deliver a written notice of your revocation to Cliffs’ Secretary at the address listed for Cliffs in the section entitled “Where You Can Find More Information” beginning on page [    ]; or

 

•

you can vote in person at the Cliffs special meeting. Please note that your attendance at the Cliffs special meeting will not alone serve to revoke your proxy.

If you are a beneficial owner of Cliffs common shares as of the close of business on the record date, you must follow the instructions of your bank, broker or other nominee to revoke or change your voting instructions.

AK Steel. Yes. If you are a stockholder of record of shares of AK Steel common stock as of the close of business on the record date, whether you vote via the Internet, by telephone or mail, you can change or revoke your proxy before it is voted at the AK Steel special meeting in any of the following ways:

 

•

you can submit a new proxy card bearing a later date;

 

•

you can vote again via the Internet or by telephone at a later time;

 

•

you can deliver a written notice of your revocation to AK Steel’s Corporate Secretary at 9227 Centre Pointe Drive, West Chester, Ohio 45069; or

 

•

you can vote in person at the AK Steel special meeting. Please note that your attendance at the AK Steel special meeting will not alone serve to revoke your proxy.

If you are a beneficial owner of AK Steel common stock as of the close of business on the record date, you must follow the instructions of your bank, broker or other nominee to revoke or change your voting instructions.

 

Q:	Where can I find the voting results of the special meetings?

 

A:

The preliminary voting results are expected to be announced at each of the special meetings. In addition, within four business days following their respective meetings, Cliffs and AK Steel each will file the final voting results of its special meeting (or, if the final voting results have not yet been certified, the preliminary results) with the SEC in a Current Report on Form 8-K.

 

Q:	If I am a Cliffs shareholder and I am not in favor of the approval of the Merger Agreement and the transactions contemplated thereby, including the issuance of Cliffs common shares in connection with the Merger, what are my rights?

 

A:

You may abstain from voting on, or vote against, the Cliffs merger proposal. However, if Cliffs shareholders approve the Cliffs merger proposal and the Merger is completed, in accordance with Section 1701.84 of the ORC, no appraisal rights will be available to the holders of Cliffs common shares in connection with the Merger or the other transactions contemplated by the Merger Agreement.

 

Q:	If I am an AK Steel stockholder and I am not in favor of the Merger, what are my rights?

 

A:

You may abstain from voting on, or vote against, the AK Steel merger proposal. However, if AK Steel stockholders approve the AK Steel merger proposal and the Merger is completed, in accordance with Section 262 of the DGCL, no appraisal rights will be available to the holders of shares of AK Steel common stock in connection with the Merger or the other transactions contemplated by the Merger Agreement.

 

Q:	Are there any risks that I should consider as a Cliffs shareholder or AK Steel stockholder in deciding how to vote?

 

A:	Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page [    ] as well as the factors considered by the Cliffs board and AK Steel board in

 

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determining to approve the Merger Agreement and related transactions in the sections entitled “The Merger—Recommendation of the Cliffs Board and Reasons for the Merger” and “The Merger—Recommendation of the AK Steel Board and Reasons for the Merger” beginning on pages [    ] and [    ], respectively. You also should read and carefully consider the risk factors of Cliffs and AK Steel contained in the documents that are incorporated by reference herein.

 

Q:	What happens if I sell my Cliffs common shares before the Cliffs special meeting?

 

A:

The record date for Cliffs shareholders entitled to vote at the Cliffs special meeting is earlier than the date of the Cliffs special meeting. If you transfer your Cliffs common shares after the record date but before the Cliffs special meeting, you will, unless special arrangements are made, retain your right to vote at the Cliffs special meeting.

 

Q:	What happens if I sell my shares of AK Steel common stock before the AK Steel special meeting?

 

A:

The record date for AK Steel stockholders entitled to vote at the AK Steel special meeting is earlier than the date of the AK Steel special meeting. If you transfer your shares of AK Steel common stock after the record date but before the AK Steel special meeting, you will, unless special arrangements are made, retain your right to vote at the AK Steel special meeting but will have transferred the right to receive the merger consideration for such shares in connection with the Merger to the person to whom you transferred your shares of AK Steel common stock.

 

Q:	What are the material U.S. federal income tax consequences of the Merger to me?

 

A:

It is intended that, for United States federal income tax purposes, the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code, of 1986, as amended, which is referred to as the Code, and it is a condition to the parties’ respective obligations to consummate the Merger that AK Steel receive a tax opinion from Weil, Gotshal & Manges LLP, AK Steel’s tax counsel, which is referred to as Weil, that the Merger will so qualify; provided, that if Weil is unwilling or unable to provide such tax opinion, (i) Cliffs’ tax counsel may, at the election of Cliffs, deliver such a tax opinion to AK Steel or (ii) if Cliffs does not elect to have its tax counsel deliver such tax opinion, AK Steel must use its reasonable best efforts to obtain such a tax opinion from another nationally recognized tax counsel reasonably acceptable to AK Steel. Assuming the Merger qualifies for the intended tax treatment, a U.S. holder of shares of AK Steel common stock generally will not recognize any gain or loss for United States federal income tax purposes upon the exchange of such holder’s shares of AK Steel common stock for shares of Cliffs common shares in the Merger, except for any gain or loss recognized with respect to cash received in lieu of a fractional share of Cliffs common shares.

For a more detailed discussion of the material United States federal income tax consequences of the Merger, please carefully review the information set forth in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page [    ] of this joint proxy statement/prospectus.

The tax consequences of the Merger to any particular stockholder will depend on that stockholder’s particular facts and circumstances. Accordingly, you are urged to consult your own tax advisor as to the specific tax consequences of the Merger.

 

Q:	When is the Merger expected to be completed?

 

A:

The Merger will be completed only following the satisfaction or waiver (if permitted) of the closing conditions described in the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page [    ]. The Merger is currently expected to close in the first half of 2020. However, it is possible that factors outside the control of both companies could result in the Merger being completed at a later time or not being completed at all.

 

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Q:	Who will solicit and pay the cost of soliciting proxies?

 

A:

Cliffs. The Cliffs board is soliciting proxies from Cliffs shareholders in connection with the Cliffs special meeting. Cliffs will bear the cost of solicitation of such proxies. Cliffs has retained Okapi Partners LLC, which is referred to as Okapi Partners, to assist in the solicitation process. Cliffs will pay Okapi Partners a fee of approximately $50,000, as well as reasonable and documented out-of-pocket expenses. Cliffs also has agreed to indemnify Okapi Partners against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).

AK Steel. The AK Steel board is soliciting proxies from AK Steel stockholders in connection with the AK Steel special meeting. AK Steel will bear the cost of solicitation of such proxies. AK Steel has retained Georgeson LLC, which is referred to as Georgeson, to assist in the solicitation process. AK Steel will pay Georgeson a fee of approximately $17,500, as well as reasonable and documented out-of-pocket expenses. AK Steel also has agreed to indemnify Georgeson against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).

 

Q:	What are the conditions to the completion of the Merger?

 

A:

In addition to the approval of the Cliffs merger proposal by Cliffs shareholders and the adoption of the Merger Agreement by AK Steel stockholders as described above, completion of the Merger is subject to the satisfaction or waiver (if permitted) of a number of other conditions, including, among others:

 

•

The Cliffs common shares issuable to AK Steel stockholders pursuant to the Merger Agreement must have been authorized for listing on the NYSE, subject to official notice of issuance;

 

•

The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which is referred to as the HSR Act, applicable to the completion of the Merger and the other transactions contemplated by the Merger Agreement must have expired or been terminated, and all approvals, notices or other requirements under the Canadian Competition Act and from the Mexican Competition Commission must have been obtained, made or satisfied; see the section entitled “The Merger—Regulatory Approvals” beginning on page [    ];

 

•

There must not have been enacted, issued, promulgated, enforced or entered by a court or other governmental entity of competent jurisdiction any applicable law or order that is in effect and restrains, enjoins or otherwise prohibits the completion of the Merger or the other transactions contemplated by the Merger Agreement;

 

•

The registration statement on Form S-4 of which this joint proxy statement/prospectus forms a part must have become effective under the Securities Act and must not be the subject of any stop order issued by the SEC or any pending proceedings initiated by the SEC seeking such a stop order;

 

•

AK Steel must have received the tax opinion referred to in the section entitled “The Merger Agreement—Tax Treatment” from its tax counsel; provided, that if AK Steel’s tax counsel is unwilling or unable to provide such tax opinion, (i) Cliffs’ tax counsel may, at the election of Cliffs, deliver its tax opinion to AK Steel or (ii) if Cliffs does not elect to have its tax counsel deliver its tax opinion, AK Steel must use its reasonable best efforts to obtain the tax opinion from another nationally recognized tax counsel reasonably acceptable to AK Steel;

 

•

The accuracy of Cliffs’ and AK Steel’s respective representations and warranties under the Merger Agreement (subject to certain materiality qualifiers); and

 

•

Cliffs’ and AK Steel’s performance of their respective obligations under the Merger Agreement in all material respects.

For a more complete summary of the conditions that must be satisfied or waived prior to completion of the Merger, see the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page [    ].

 

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Q:	I am an AK Steel stockholder. How do I exchange my shares of AK Steel common stock for the merger consideration? Should I send in my AK Steel stock certificates now?

 

A:	No. To the extent you hold shares that are represented by a certificate, you should keep your existing stock certificates at this time.

Once the Merger has been completed, AK Steel stockholders will receive a letter of transmittal and written instructions for exchanging their stock certificates or surrendering their book-entry shares from the exchange agent. Each AK Steel stockholder that holds shares represented by a certificate must deliver to the exchange agent the certificate representing such shares (or an affidavit of loss in lieu of the certificate) together with such other documents and information as are required by the letter of transmittal and accompanying instructions. Each AK Steel stockholder who holds book-entry shares of AK Steel common stock will be required to deliver to the exchange agent customary evidence of ownership of such shares (including the delivery of an “agent’s message”) as determined by the exchange agent and set forth in the letter of transmittal.

After receiving the proper documentation from you, following the effective time of the Merger, the exchange agent will deliver to you, for each share of AK Steel common stock, the merger consideration to which you are entitled as well as cash in lieu of any fractional Cliffs common shares and any applicable dividends or other distributions payable on your Cliffs common shares with a record date at or after the effective time of the Merger. See the section entitled “The Merger Agreement—Exchange Procedures” beginning on page [    ].

 

Q:	What equity stake will AK Steel stockholders hold in Cliffs immediately following the Merger?

 

A:

Based on the number of issued and outstanding Cliffs common shares and shares of AK Steel common stock as of January 24, 2020, holders of shares of AK Steel common stock as of immediately prior to the closing of the Merger would hold, in the aggregate, approximately 32% of the issued and outstanding Cliffs common shares immediately following the closing of the Merger. The exact equity stake of AK Steel stockholders in Cliffs immediately following the Merger will depend on the number of Cliffs common shares and shares of AK Steel common stock issued and outstanding immediately prior to the effective time of the Merger, as described in the section entitled “The Merger Agreement—Merger Consideration” beginning on page [    ].

 

Q:	I am an AK Steel stockholder. Will the Cliffs common shares issued in the Merger receive a dividend?

 

A:

After the closing of the Merger, the Cliffs common shares issued in connection with the Merger will carry with them the right to receive (upon the exchange or surrender of your shares of AK Steel common stock) the same dividends on the Cliffs common shares as all other holders of Cliffs common shares with respect to any dividends or distributions that are declared with a record date at or after the effective time of the Merger.

Cliffs has declared a quarterly cash dividend on Cliffs common shares during each of the last five completed fiscal quarters, including a dividend of $0.06 per Cliffs common share that was declared on December 2, 2019 and which was paid on January 15, 2020 to holders of record of Cliffs common shares as of January 3, 2020. Any future Cliffs dividends will remain subject to approval by the Cliffs board. See the section entitled “Summary—Market and Dividend Information; Implied Value of Merger Consideration—Cliffs Trading Market and Dividend Information” beginning on page [    ].

 

Q:	What should I do now?

 

A:

You should read this joint proxy statement/prospectus carefully in its entirety, including the annexes, and return your completed, signed and dated proxy card(s) by mail in the enclosed postage-paid envelope or submit your voting instructions via the Internet or by telephone as soon as possible so that your Cliffs common shares or shares of AK Steel common stock will be voted in accordance with your instructions.

 

- 14 -

Q:	Whom do I call if I have questions about the special meetings or how to vote?

 

A:	If you have questions about the Cliffs special meeting, the AK Steel special meeting, desire additional copies of this joint proxy statement/prospectus or additional proxies, or would like help in voting your shares, you may contact the applicable company’s proxy solicitor set forth below:

 

CLIFFS PROXY SOLICITOR		AK STEEL PROXY SOLICITOR
Okapi Partners LLC 1212 Avenue of the Americas, 24th Floor New York, New York 10036   Banks and brokers call: +1-212-297-0720 Shareholders and all others call toll-free: + 1-877-869-0171 Email: info@okapipartners.com		Georgeson LLC 1290 Avenue of the Americas, 9th Floor New York, New York 10104   Toll-free: +1-866-413-5899

 

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RISK FACTORS

In addition to the other information contained in or incorporated by reference herein, including the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page [    ], AK Steel stockholders should carefully consider the following risks before deciding how to vote with respect to the proposals to be considered and voted on at the AK Steel special meeting, and Cliffs shareholders should carefully consider the following risks before deciding how to vote with respect to the proposals to be considered and voted on at the Cliffs special meeting. AK Steel stockholders and Cliffs shareholders should also consider the other information in this joint proxy statement/prospectus and the other documents incorporated by reference herein, particularly the risk factors contained in Cliffs’ and AK Steel’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. See the section entitled “Where You Can Find More Information” beginning on page [    ].

Risks Relating to the Merger

Because the market price of Cliffs common shares will fluctuate, AK Steel stockholders cannot be certain of the market value of the consideration they will receive in the Merger until the Merger is completed.

Subject to the terms and conditions set forth in the Merger Agreement, upon consummation of the Merger, each share of AK Steel common stock issued and outstanding immediately prior to the effective time of the Merger (other than AK Steel restricted shares and shares of AK Steel common stock owned by Cliffs, Merger Sub or AK Steel) will be converted into the right to receive 0.400 Cliffs common shares (as well as cash in lieu of any fractional Cliffs common shares and any dividends or distributions on the Cliffs common shares with a record date at or after the effective time of the Merger). The exchange ratio in the Merger is fixed, and there will be no adjustment to the merger consideration for changes in the market price of Cliffs common shares or AK Steel common stock prior to the completion of the Merger.

If the Merger is completed, there will be a time lapse between the date of this joint proxy statement/prospectus, the dates on which AK Steel stockholders vote to approve the AK Steel merger proposal at the AK Steel special meeting and Cliffs shareholders vote to approve the Cliffs merger proposal at the Cliffs special meeting, and the date on which AK Steel stockholders actually receive the merger consideration. The market value of Cliffs common shares may fluctuate during and after these periods as a result of a variety of factors, including general market and economic conditions, changes in Cliffs’ business, operations and prospects and regulatory considerations. Such factors are difficult to predict and in many cases may be beyond the control of Cliffs and AK Steel. Consequently, at the time AK Steel stockholders must decide whether to adopt the Merger Agreement, they will not know the actual market value of the merger consideration they will receive for each of their shares of AK Steel common stock when the Merger is completed.

The actual value of the merger consideration received by AK Steel stockholders at the completion of the Merger will depend on the market value of the Cliffs common shares at that time. This market value may differ, possibly materially, from the market value of Cliffs common shares at the time the Merger Agreement was entered into or at any other time. AK Steel stockholders should obtain current stock quotations for Cliffs common shares, which are traded on the NYSE under the ticker symbol, “CLF,” before voting their shares of AK Steel common stock. For additional information about the AK Steel merger consideration, see the section entitled “The Merger Agreement—Merger Consideration” beginning on page [    ].

The market price of Cliffs common shares will continue to fluctuate after the Merger.

Upon completion of the Merger, holders of AK Steel common stock will become holders of Cliffs common shares. The market price of Cliffs common shares may fluctuate significantly following completion of the Merger and holders of AK Steel common stock could lose some or all of the value of their investment in Cliffs common shares. In addition, any significant price or volume fluctuations in the stock market generally could have a material adverse effect on the market for, or liquidity of, the Cliffs common shares, regardless of Cliffs’ actual operating performance.

 

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Former AK Steel stockholders will have a lesser ownership and voting interest in the combined company after the Merger than they do in AK Steel today and will exercise less influence over management.

Currently, AK Steel stockholders have the right to vote in the election of directors to the AK Steel board and the power to approve or reject any matters requiring stockholder approval under Delaware law and AK Steel’s certificate of incorporation and by-laws. Following the completion of the Merger, each former AK Steel stockholder’s ownership interest in Cliffs, in respect of such shareholder’s former shares of AK Steel common stock, will be less than the AK Steel stockholder’s current percentage ownership of AK Steel. Based on the number of issued and outstanding Cliffs common shares and shares of AK Steel common stock as of January 24, 2020 and the exchange ratio of 0.400, former AK Steel stockholders are expected to own approximately 32% of the outstanding Cliffs common shares after the Merger, without giving effect to any Cliffs common shares held by AK Steel stockholders prior to the completion of the Merger. Even if all former AK Steel stockholders voted together on all matters presented to Cliffs shareholders from time to time, the former AK Steel stockholders would exercise significantly less influence over Cliffs after the completion of the Merger relative to their influence over AK Steel prior to the completion of the Merger, and thus would have a less significant impact on the election of the Cliffs board and on the approval or rejection of future Cliffs proposals submitted to a shareholder vote.

The Cliffs common shares received by AK Steel stockholders as a result of the Merger will have different rights from shares of AK Steel common stock.

Upon completion of the Merger, AK Steel stockholders will no longer be stockholders of AK Steel, and AK Steel stockholders will become shareholders of Cliffs. There will be important differences between the current rights of AK Steel stockholders and the rights such stockholders will have as shareholders of Cliffs, including that Cliffs shareholders do not have any specific rights under the ORC or Cliffs’ organizational documents to make shareholder proposals. See the section entitled “Comparison of Stockholders’ and Shareholders’ Rights” beginning on page [    ] for a discussion of the rights associated with AK Steel common stock and Cliffs common shares.

The market price of Cliffs common shares may be affected by factors different from those that historically have affected shares of AK Steel common stock.

Upon completion of the Merger, holders of AK Steel common stock will become holders of Cliffs common shares. The business of Cliffs differs from that of AK Steel, and, accordingly, the financial position or results of operations or cash flows of Cliffs after the Merger, as well as the market price of Cliffs common shares, may be affected by factors different from those currently affecting the financial position or results of operations or cash flows of AK Steel. Following the completion of the Merger, AK Steel will be part of a larger company with other lines of business and a broader geographic footprint, so decisions affecting AK Steel may be made in respect of the larger combined business as a whole rather than the AK Steel business individually.

The Merger Agreement limits Cliffs’ ability and AK Steel’s ability to pursue alternatives to the Merger.

The Merger Agreement contains provisions that may discourage a third party from submitting an acquisition proposal to Cliffs or AK Steel that might result in greater value to Cliffs shareholders or AK Steel stockholders than the Merger, or may result in a potential acquirer of Cliffs, or a potential competing acquirer of AK Steel proposing to pay a lower per share price to acquire Cliffs or AK Steel, respectively, than it might otherwise have proposed to pay. These provisions include a general prohibition on Cliffs and AK Steel from soliciting or, subject to certain exceptions relating to the exercise of fiduciary duties by the Cliffs board or the AK Steel board, entering into discussions with any third party regarding any acquisition proposal or offer for a competing transaction, and a termination fee that is payable if the Merger Agreement is terminated to accept a superior acquisition proposal. See the section entitled “The Merger Agreement—Termination” beginning on page [    ].

 

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The Merger Agreement may be terminated in accordance with its terms and the Merger may not be completed.

The Merger Agreement contains a number of conditions that must be satisfied or waived in order to complete the Merger. Those conditions include, among others:

 

•

the adoption of the Merger Agreement by AK Steel stockholders;

 

•

the approval by Cliffs shareholders of the Merger Agreement and the transactions contemplated by the Merger Agreement, including the issuance of Cliffs common shares in connection with the Merger;

 

•

the approval to list the Cliffs common shares issuable in connection with the Merger on the NYSE;

 

•

the expiration or termination of the waiting period applicable to the Merger under the HSR Act and receipt of required regulatory approvals in Canada and Mexico;

 

•

the absence of any governmental order or law prohibiting the consummation of the Merger;

 

•

the effectiveness of the registration statement of which this joint proxy statement/prospectus forms a part;

 

•

the accuracy of Cliffs’ and AK Steel’s respective representations and warranties under the Merger Agreement (subject to the materiality standards set forth in the Merger Agreement);

 

•

Cliffs’ and AK Steel’s performance of their respective obligations under the Merger Agreement in all material respects;

 

•

the absence of a material adverse effect on Cliffs (as described in the Merger Agreement); and

 

•

AK Steel’s receipt of a written opinion of AK Steel’s tax counsel (or, if AK Steel’s tax counsel is unwilling or unable to deliver such tax opinion, Cliffs’ tax counsel, or, if Cliffs’ tax counsel does not deliver such an opinion, subject to AK Steel using reasonable best efforts to obtain the tax opinion from another nationally recognized tax counsel reasonably acceptable to AK Steel) regarding the U.S. federal income tax treatment of the transaction.

These conditions to the closing of the Merger may not be fulfilled in a timely manner or at all, and, accordingly, the Merger may be delayed or may not be completed.

In addition, if the Merger is not completed by June 30, 2020 (subject to Cliffs and AK Steel each being entitled to extend the date to September 30, 2020 and then December 31, 2020 if required antitrust approvals have not yet been obtained or there is an impediment under any antitrust law), either Cliffs or AK Steel may choose not to proceed with the Merger. The parties can mutually decide to terminate the Merger Agreement at any time, before or after the receipt of AK Steel stockholder approval or Cliffs shareholder approval. See the section entitled “The Merger Agreement—Termination” beginning on page [    ] for more detail on these and other circumstances in which Cliffs and AK Steel may elect to terminate the Merger Agreement.

Failure to complete the Merger could negatively impact the price of Cliffs common shares and the price of shares of AK Steel common stock, as well as Cliffs’ and AK Steel’s respective future businesses and financial results.

If the Merger is not completed for any reason, including the failure of Cliffs shareholders to approve the Cliffs merger proposal or AK Steel stockholders to adopt the Merger Agreement, Cliffs’ and AK Steel’s respective businesses and financial results may be adversely affected, including as follows:

 

•

Cliffs and AK Steel may experience negative reactions from the financial markets, including negative impacts on the market price of Cliffs common shares and shares of AK Steel common stock;

 

•

the manner in which customers, vendors, business partners and other third parties perceive Cliffs and AK Steel may be negatively impacted, which in turn could affect Cliffs’ and AK Steel’s ability to compete for new business or obtain renewals in the marketplace more broadly;

 

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•

Cliffs and AK Steel may experience negative reactions from employees, which may adversely affect, among other things, productivity and occupational safety; and

 

•

Cliffs and AK Steel will have expended significant time and resources that could otherwise have been spent on Cliffs’ and AK Steel’s existing businesses and the pursuit of other opportunities that could have been beneficial to each company, and Cliffs’ and AK Steel’s ongoing business and financial results may be adversely affected.

In addition to the above risks, if the Merger Agreement is terminated and either Cliffs’ or AK Steel’s board seeks an alternative transaction, Cliffs shareholders or AK Steel stockholders cannot be certain that Cliffs or AK Steel will be able to find a party willing to engage in a transaction on more attractive terms than the Merger. If the Merger Agreement is terminated under specified circumstances, either Cliffs or AK Steel may be required to pay the other party a termination fee. See the section entitled “The Merger Agreement—Termination” beginning on page [    ] for a description of these circumstances.

Required regulatory approvals may impose conditions that are not presently anticipated or cannot be met. In addition, an adverse outcome of any antitrust or similar review undertaken by a governmental authority could prevent the Merger from being completed or have an adverse effect on Cliffs following the Merger.

Completion of the Merger is conditioned upon the approval by the NYSE of the listing of the Cliffs common shares to be issued in the Merger (subject to official notice of issuance) and the expiration or termination of the waiting period (or any extension thereof) applicable to the Merger under the HSR Act and required clearance by the Canadian Competition Bureau and Mexican Competition Commission. In deciding whether to grant the required antitrust clearances, the relevant governmental entities will consider the anticipated effect of the Merger within their relevant jurisdiction, including, among other things, the impact on the parties’ respective customers and suppliers. The terms and conditions of any approval that is granted may impose requirements, limitations or costs or place restrictions on the conduct of the combined company’s business or may materially delay the completion of the Merger.

Under the Merger Agreement, the parties agreed to use their respective reasonable best efforts to obtain these authorizations and consents and to take any and all steps necessary to avoid or eliminate impediments under any antitrust laws that may be asserted by any governmental authority so as to enable the completion of the Merger as promptly as practicable. However, Cliffs’ obligations to take such actions are subject to limitations, including that Cliffs will not be required to commit to agree to effect any sale, divestiture, lease, license, transfer or otherwise dispose of or hold separate any of the assets or business of Cliffs or AK Steel. Further, Cliffs is not required to agree to certain other restrictions or actions if such actions in the aggregate would or would reasonably be expected to have a materially adverse effect on the combined company, taken as a whole after giving effect to the Merger, or have an economic effect on Cliffs or AK Steel in an amount that would be material when compared to the benefits anticipated to be derived by Cliffs from the Merger.

On January 22, 2020, the FTC granted early termination of the waiting period applicable to the Merger under the HSR Act. However, even after the termination of the waiting period under the HSR Act, at any time before or after completion of the Merger, the FTC or the DOJ could subsequently investigate the Merger and decide to take action under the antitrust laws to prevent or unwind the Merger, require the divestiture of assets, or require changes to the terms of the Merger or Merger Agreement were they to find that the Merger has harmed competition.

If the Canadian Competition Bureau or the Mexican Competition Commission determine that the Merger is likely to substantially prevent or lessen competition in Canada or Mexico, respectively, they could take action under applicable antitrust laws to require the divestiture of assets, impose conditions on the completion of the Merger or require changes to the terms of the Merger or Merger Agreement.

 

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Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying or impeding completion of the Merger or of imposing additional costs or limitations on Cliffs following completion of the Merger, any of which might have an adverse effect on Cliffs following completion of the Merger. Additionally, state attorneys general could seek to block or challenge the Merger as they deem necessary or desirable in the public interest at any time, including after completion of the Merger. In addition, in some circumstances, a third party could initiate a private action under antitrust laws challenging or seeking to enjoin the Merger, before or after it is completed.

Cliffs and AK Steel will be subject to business uncertainties while the Merger is pending, which could adversely affect their respective businesses.

Uncertainty about the effect of the Merger on employees, suppliers and customers may have an adverse effect on Cliffs and AK Steel. These uncertainties may impair Cliffs’ and AK Steel’s ability to attract, retain and motivate key personnel until the Merger is completed and for a period of time thereafter, and could cause suppliers, customers and others that deal with Cliffs and AK Steel to seek to change their existing business relationships with Cliffs and AK Steel, respectively. For example, Cliffs’ customers may not want to purchase their iron ore from a company that is also a competitor. Employee retention at AK Steel may also be challenging during the pendency of the Merger, as employees may experience uncertainty about their roles with Cliffs following the Merger. In addition, the Merger Agreement restricts Cliffs and AK Steel from entering into certain corporate transactions and taking other specified actions without the consent of the other party, and generally requires AK Steel to continue its operations in the ordinary course, until completion of the Merger. These restrictions may prevent Cliffs and AK Steel from pursuing attractive business opportunities that may arise prior to the completion of the Merger. Please see the section entitled “The Merger Agreement—Interim Operations of AK Steel and Cliffs Pending the Merger” beginning on page [    ], for a description of the restrictive covenants to which Cliffs and AK Steel are subject.

Directors and executive officers of AK Steel may have interests in the Merger that are different from, or in addition to, the interests of AK Steel stockholders.

Directors and executive officers of AK Steel may have interests in the Merger that are different from, or in addition to, the interests of AK Steel stockholders generally. These interests include, among others, the treatment of outstanding equity and equity-based awards pursuant to the Merger Agreement, certain enhanced nonqualified retirement benefits to which the executive officers may become entitled on completion of the Merger, and potential severance and other benefits upon a qualifying termination in connection with the Merger. These interests are described in more detail in the section entitled “The Merger—Interests of AK Steel Directors and Executive Officers in the Merger” beginning on page [    ]. In addition, Cliffs has agreed to appoint three current members of the AK Steel board to the Cliffs board upon the closing of the Merger, and certain current and former directors and officers of AK Steel will be entitled to ongoing indemnification and insurance coverage as described in the section entitled “The Merger—Indemnification and Insurance” beginning on page [    ].

The Merger may be less accretive than expected, or may be dilutive, to Cliffs’ earnings per share, which may negatively affect the market price of Cliffs common shares.

The Merger may be less accretive than expected, or may be dilutive, to Cliffs’ earnings per share. Estimates of Cliffs’ earnings per share in the future are based on preliminary estimates that may materially change. In addition, future events and conditions could decrease or delay any accretion, result in dilution or cause greater dilution than is currently expected, including:

 

•

adverse changes in market conditions;

 

•

commodity prices for iron ore and steel;

 

•

production levels;

 

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•

operating results;

 

•

competitive conditions;

 

•

laws and regulations affecting the iron ore and steel businesses;

 

•

capital expenditure obligations;

 

•

higher than expected integration costs;

 

•

lower than expected synergies; and

 

•

general economic conditions.

Any dilution of, or decrease or delay of any accretion to, Cliffs’ earnings per share could cause the price of Cliffs common shares to decline.

Cliffs and AK Steel will incur significant transaction and Merger-related costs in connection with the Merger, which may be in excess of those anticipated by Cliffs or AK Steel.

Each of Cliffs and AK Steel has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement, including the costs and expenses of filing, printing and mailing this joint proxy statement/prospectus and all filing and other fees paid to the SEC and other regulatory agencies in connection with the Merger.

Cliffs and AK Steel expect to continue to incur a number of non-recurring costs associated with completing the Merger, combining the operations of the two companies and achieving anticipated synergies. These fees and costs have been, and will continue to be, substantial. The substantial majority of non-recurring expenses will consist of transaction costs related to the Merger and include, among others, fees paid to financial, legal and accounting advisors, employee retention costs, severance and benefit costs and filing fees.

Cliffs and AK Steel will also incur transaction fees and costs related to formulating and implementing integration plans, including facilities and systems consolidation costs and employment-related costs. Cliffs and AK Steel will continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the Merger and the integration of the two companies’ businesses. Although Cliffs and AK Steel each expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow Cliffs and AK Steel to offset integration-related costs over time, this net benefit may not be achieved in the near term or at all. See the section entitled “Risk Factors—The integration of AK Steel into Cliffs may not be as successful as anticipated” beginning on page [    ].

The costs described above, as well as other unanticipated costs and expenses, could have a material adverse effect on the financial condition and operating results of Cliffs following the completion of the Merger.

Many of these costs will be borne by Cliffs or AK Steel even if the Merger is not completed.

Lawsuits have been filed against AK Steel, its directors and Cliffs in connection with the Merger and additional lawsuits may be filed in the future; an adverse ruling in one or more of these lawsuits may delay the completion of the Merger or prevent the Merger from being completed.

Four actions, including one putative class action lawsuit, have been filed in federal court in Delaware and New York by purported AK Steel stockholders in connection with the Merger: the Stein Action, Spuhler Action, Franchi Action and Raul Action. Each of the AK Steel Stockholder Actions names AK Steel and its directors as defendants, and the Franchi Action names Cliffs and Merger Sub as additional defendants. Each of the AK Steel Stockholder Actions alleges, among other things, that the registration statement on Form S-4 filed by Cliffs in connection with the Merger is false and misleading and/or omits material information concerning the transactions

 

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contemplated by the Merger Agreement in violation of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated under the Exchange Act. The plaintiffs in the AK Steel Stockholder Actions, among other things, seek to enjoin the transactions contemplated by the Merger Agreement and an award of attorneys’ fees and expenses.

Additional lawsuits related to the transactions contemplated by the Merger Agreement may be filed in the future. Even if the lawsuits are without merit, these claims can result in substantial costs and divert management time and resources. There can be no assurance that any of the defendants will be successful in defending the pending or any potential future lawsuits. A preliminary injunction could delay or jeopardize the completion of the Merger, and an adverse judgment granting permanent injunctive relief could indefinitely enjoin the completion of the Merger. An adverse judgment in any AK Steel Stockholder Action could result in monetary damages, which could have a negative impact on Cliffs’ and AK Steel’s respective liquidity and financial condition.

The opinions of Cliffs’ and AK Steel’s respective financial advisors will not reflect changes in circumstances between the signing of the Merger Agreement and the completion of the Merger.

The Cliffs board and the AK Steel board received opinions from Moelis and Goldman Sachs, respectively, in connection with the signing of the Merger Agreement regarding the fairness (from a financial point of view) of the exchange ratio to Cliffs and the AK Steel stockholders (other than Cliffs and its affiliates), respectively. Cliffs and AK Steel have not requested or obtained updated opinions from their respective financial advisors as of the date of this joint proxy statement/prospectus, nor do they anticipate requesting or obtaining updated opinions in the future, including as of the closing date of the Merger. Changes in the operations and prospects of Cliffs or AK Steel, general market and economic conditions and other factors that may be beyond the control of Cliffs or AK Steel, and on which Cliffs’ and AK Steel’s financial advisors’ opinions were based, may significantly alter the value of Cliffs or AK Steel or the prices of the Cliffs common shares or of the shares of AK Steel common stock by the time the Merger is completed. The opinions do not speak as of the time the Merger will be completed or as of any date other than the dates referenced in such opinions. Because Cliffs and AK Steel do not currently anticipate asking their respective financial advisors to update their opinions, the opinions will not address the fairness of the exchange ratio, from a financial point of view, at the time of the Cliffs special meeting or AK Steel special meeting, respectively, or at the time the Merger is completed. The Cliffs board’s recommendation that Cliffs shareholders vote “FOR” approval of the Cliffs merger proposal and the AK Steel board’s recommendation that AK Steel stockholders vote “FOR” adoption of the Merger Agreement, however, are each made as of the date of this joint proxy statement/prospectus. For a description of the opinions that Cliffs and AK Steel received from their respective financial advisors, please see the sections entitled “The Merger—Opinion of Moelis, Cliffs’ Financial Advisor” and “The Merger—Opinion of Goldman Sachs, AK Steel’s Financial Advisor” beginning on pages [    ] and [    ], respectively.

Completion of the Merger may trigger change in control or other provisions in certain agreements to which AK Steel is a party.

The completion of the Merger may trigger change in control or other provisions in certain agreements to which AK Steel is a party. If Cliffs and AK Steel are unable to obtain the consent of the counterparties to the Merger or negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, which may include terminating the agreements or seeking monetary damages. Even if Cliffs and AK Steel are able to obtain consents or negotiate waivers, the counterparties may require consideration for granting such consents or waivers or seek to renegotiate the agreements on terms less favorable to AK Steel.

The combined company’s debt may limit its financial flexibility.

As of September 30, 2019, Cliffs had approximately $2.1 billion of outstanding indebtedness and AK Steel had approximately $2.0 billion of outstanding indebtedness. Cliffs continues to review the treatment of its and AK Steel’s existing indebtedness and Cliffs and/or AK Steel may seek to repay, refinance, repurchase, redeem, exchange or otherwise terminate Cliffs’ or AK Steel’s existing indebtedness prior to, in connection with or following the completion of the Merger. If Cliffs does seek to refinance its or AK Steel’s existing indebtedness, there can be no guarantee that Cliffs would be able to execute the refinancing on favorable terms or at all. In

 

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addition, in connection with entering into the Merger Agreement, Cliffs obtained commitments to provide debt financing in an amount sufficient to repay AK Steel’s outstanding indebtedness under its revolving credit facility as well as AK Steel’s outstanding senior secured notes. Although the receipt of such financing is not a condition to the closing of the Merger, the unavailability of such financing could adversely impact the financial condition and liquidity of the combined company.

Assuming Cliffs and AK Steel do not repay, repurchase, redeem, exchange or otherwise terminate any of Cliffs’ or AK Steel’s existing indebtedness, immediately following the completion of the Merger, Cliffs is expected to have outstanding indebtedness of approximately $4.2 billion, based on Cliffs’ and AK Steel’s outstanding indebtedness as of September 30, 2019 and the financing activities expected to be completed in conjunction with the Merger.

Any increase in Cliffs’ indebtedness could have adverse effects on its financial condition and results of operations, including:

 

•

increasing Cliffs’ vulnerability to changing economic, regulatory and industry conditions;

 

•

limiting Cliffs’ ability to compete and Cliffs’ flexibility in planning for, or reacting to, changes in its business and the industry;

 

•

limiting Cliffs’ ability to pay dividends to its shareholders;

 

•

limiting Cliffs’ ability to borrow additional funds; and

 

•

requiring Cliffs to dedicate a substantial portion of its cash flow from operations to payments on its debt, thereby reducing funds available for working capital, capital expenditures, acquisitions, share repurchases, dividends and other purposes.

In addition, in connection with executing Cliffs’ business strategies following the Merger, Cliffs expects to continue to evaluate the possibility of acquiring additional assets and making further strategic investments, and Cliffs may elect to finance these endeavors by incurring additional indebtedness.

Cliffs’ ability to arrange any additional financing for the purposes described above or otherwise will depend on, among other factors, Cliffs’ financial position and performance, as well as prevailing market conditions and other factors beyond Cliffs’ control. Cliffs cannot assure you that it will be able to obtain such financing on acceptable terms or at all.

The unaudited pro forma condensed combined financial information and unaudited forecasted financial information included in this joint proxy statement/prospectus is presented for illustrative purposes only and does not represent the actual financial position or results of operations of the combined company following the completion of the Merger. Future results of the combined company may differ, possibly materially, from the unaudited pro forma condensed combined financial information and unaudited forecasted financial information presented in this joint proxy statement/prospectus.

The unaudited pro forma condensed combined financial statements and unaudited forecasted financial information included in this joint proxy statement/prospectus is presented for illustrative purposes only, contains a variety of adjustments, assumptions and preliminary estimates and does not represent the actual financial position or results of operations of Cliffs and AK Steel prior to the Merger or that of the combined company following the Merger for several reasons. Specifically, Cliffs has not completed the detailed valuation analyses to arrive at the final estimates of the fair values of the assets to be acquired and liabilities to be assumed and the related allocation of purchase price and the unaudited pro forma condensed combined financial statements do not reflect the effects of transaction-related costs and integration costs. See the sections entitled “Unaudited Pro Forma Condensed Combined Financial Statements” and “Notes to Unaudited Pro Forma Condensed Combined Financial Statements” beginning on pages [    ] and [    ], respectively. In addition, the Merger and post-Merger integration process may give rise to unexpected liabilities and costs, including costs associated with transaction-

 

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related litigation or other claims. Unexpected delays in completing the Merger or in connection with the post-Merger integration process may significantly increase the related costs and expenses incurred by Cliffs. The actual financial positions and results of operations of Cliffs and AK Steel prior to the Merger and that of the combined company following the Merger may be different, possibly materially, from the unaudited pro forma condensed combined financial statements or unaudited forecasted financial information included in this joint proxy statement/prospectus. In addition, the assumptions used in preparing the unaudited pro forma condensed combined financial statements and unaudited forecasted financial information included in this joint proxy statement/prospectus may not prove to be accurate and may be affected by other factors. Any significant changes in the market price of Cliffs common shares may cause a significant change in the purchase price used for Cliffs’ accounting purposes and the unaudited pro forma condensed combined financial statements included in this joint proxy statement/prospectus.

The integration of AK Steel into Cliffs may not be as successful as anticipated.

The Merger involves numerous operational, strategic, financial, accounting, legal, tax and other functions that must be integrated. Difficulties in integrating AK Steel into Cliffs may result in the combined company performing differently than expected, in operational challenges or in the failure to realize anticipated expense-related efficiencies. Cliffs’ and AK Steel’s existing businesses could also be negatively impacted by the Merger. Potential difficulties that may be encountered in the integration process include, among other factors:

 

•

the inability to successfully integrate the businesses of AK Steel into Cliffs in a manner that permits Cliffs to achieve the anticipated benefits and cost savings from the Merger;

 

•

challenges associated with managing the larger, more complex, integrated business;

 

•

not realizing anticipated operating synergies or incurring unexpected costs to realize such synergies;

 

•

integrating personnel from the two companies while maintaining focus on providing consistent, high-quality products;

 

•

potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with the Merger;

 

•

uncertainties related to the entry into a new line of business;

 

•

loss of key employees;

 

•

integrating relationships with customers, vendors and business partners;

 

•

performance shortfalls at one or both of the companies as a result of the diversion of management’s attention caused by completing the Merger and integrating AK Steel’s operations into Cliffs; and

 

•

the disruption of, or the loss of momentum in, each company’s ongoing business or inconsistencies in standards, controls, procedures and policies.

Cliffs’ results may suffer if it does not effectively manage its expanded operations following the Merger.

Following completion of the Merger, Cliffs’ success will depend, in part, on its ability to manage its expansion, which poses numerous risks and uncertainties, including the need to integrate the operations and business of AK Steel into its existing business in an efficient and timely manner, to combine systems and management controls.

Even if Cliffs and AK Steel complete the Merger, Cliffs may fail to realize all of the anticipated benefits of the proposed Merger.

The success of the proposed Merger will depend, in part, on Cliffs’ ability to realize the anticipated benefits and cost savings from combining Cliffs’ and AK Steel’s businesses. The anticipated benefits and cost savings of the proposed Merger may not be realized fully or at all, may take longer to realize than expected, may require more non-recurring costs and expenditures to realize than expected or could have other adverse effects that Cliffs

 

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does not currently foresee. Some of the assumptions that Cliffs has made, such as with respect to anticipated operating synergies or the costs associated with realizing such synergies; significant long-term cash flow generation; and the benefits of being a vertically integrated value-added iron ore and steel producing enterprise, may not be realized. The integration process may, for each of Cliffs and AK Steel, result in the loss of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies. There could be potential unknown liabilities and unforeseen expenses associated with the Merger that were not discovered in the course of performing due diligence.

Uncertainties associated with the Merger may cause a loss of management personnel and other employees, which could adversely affect the future business and operations of the combined company.

Cliffs and AK Steel are dependent on the experience and industry knowledge of their officers and other employees to execute their business plans. Each company’s success until the Merger and the combined company’s success after the Merger will depend in part upon the ability of Cliffs and AK Steel to retain management personnel and other employees. Current and prospective employees of Cliffs and AK Steel may experience uncertainty about their roles within the combined company following the Merger, which may have an adverse effect on the ability of each of Cliffs and AK Steel to attract or retain management and other personnel. Accordingly, no assurance can be given that the combined company will be able to attract or retain management personnel and other employees of Cliffs and AK Steel to the same extent that Cliffs and AK Steel have previously been able to attract or retain their own employees.

The market price of Cliffs common shares may decline in the future as a result of the sale of Cliffs common shares held by former AK Steel stockholders or current Cliffs shareholders.

Cliffs expects to issue approximately 133.1 million Cliffs common shares to AK Steel stockholders in the Merger (including shares underlying AK Steel equity awards expected to be outstanding at the effective time of the Merger, which will be converted into awards with respect to Cliffs common shares). Following their receipt of Cliffs common shares as merger consideration, former AK Steel stockholders may seek to sell the Cliffs common shares delivered to them. Other Cliffs shareholders may also seek to sell Cliffs common shares held by them following, or in anticipation of, completion of the Merger. These sales (or the perception that these sales may occur), coupled with the increase in the outstanding number of Cliffs common shares, may affect the market for, and the market price of, Cliffs common shares in an adverse manner.

The combined company may record tangible and intangible assets, including goodwill, that could become impaired and result in material non-cash charges to the results of operations of the combined company in the future.

The Merger will be accounted for as an acquisition by Cliffs in accordance with accounting principles generally accepted in the United States. Under the acquisition method of accounting, the assets and liabilities of AK Steel and its subsidiaries will be recorded, as of completion of the Merger, at their respective fair values and added to those of Cliffs. The reported financial condition and results of operations of Cliffs for periods after completion of the Merger will reflect AK Steel balances and results after completion of the Merger but will not be restated retroactively to reflect the historical financial position or results of operations of AK Steel and its subsidiaries for periods prior to the Merger. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page [    ].

Under the acquisition method of accounting, the total purchase price will be allocated to AK Steel’s tangible assets and liabilities and identifiable intangible assets based on their fair values as of the date of completion of the Merger. The excess, if any, of the purchase price over those fair values will be recorded as goodwill. To the extent the value of tangible or intangible assets, including goodwill, becomes impaired, the combined company may be required to incur material non-cash charges relating to such impairment. The combined company’s operating results may be significantly impacted from both the impairment and the underlying trends in the business that triggered the impairment.

 

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The ability to use AK Steel’s and Cliffs’ respective pre-Merger net operating loss carryforwards and certain other tax attributes to offset future taxable income may be subject to certain limitations.

If a corporation undergoes an “ownership change” within the meaning of Section 382 of the Code, the corporation’s net operating loss carryforwards and certain other tax attributes arising before the “ownership change” are subject to limitations after the “ownership change.” An “ownership change” under Section 382 of the Code generally occurs if one or more shareholders or groups of shareholders who own at least 5% of the corporation’s equity increase their ownership in the aggregate by more than 50 percentage points over their lowest ownership percentage within a rolling period that begins on the later of three years prior to the testing date and the date of the last “ownership change.” If an “ownership change” were to occur, Section 382 of the Code would impose an annual limit on the amount of pre-ownership change net operating loss carryforwards and other tax attributes the corporation could use to reduce its taxable income, potentially increasing and accelerating the corporation’s liability for income taxes, and also potentially causing tax attributes to expire unused. The amount of the annual limitation is determined based on a corporation’s value immediately prior to the ownership change.

As of December 31, 2018, AK Steel had U.S. federal net operating loss carryforwards of approximately $2.2 billion and approximately $89.2 million in deferred tax assets for state net operating loss carryforwards and tax credit carryforwards. The Merger likely will result in an “ownership change” with respect to AK Steel. Accordingly, all or a portion of AK Steel’s U.S. federal net operating loss carryforwards and certain other tax attributes likely would be subject to limitations (or disallowance) on their use after the Merger. Similar rules with respect to the state net operating loss carryforwards may apply under state tax laws.

As of December 31, 2018, Cliffs had U.S. federal net operating loss carryforwards of approximately $2.1 billion and state net operating loss carryforwards of approximately $1.5 billion. Cliffs’ ability to utilize the $2.1 billion U.S. federal net operating loss carryforwards may be limited if Cliffs experiences an “ownership change” under Section 382 of the Code. Similar rules with respect to the $1.5 billion state net operating loss carryforwards may apply under state tax laws. The issuance of Cliffs common shares to AK Steel stockholders in the Merger or in connection with other issuances or sales of Cliffs common shares (including certain transactions involving Cliffs common shares that are outside of Cliffs’ control) could cause an “ownership change.”

Subsequent “ownership changes” may further affect the limitation in future years, and similar rules may also apply under state and foreign tax laws. Consequently, even if the combined company achieves profitability, it may not be able to utilize a material portion of AK Steel’s, Cliffs’ or the combined company’s net operating loss carryforwards and other tax attributes, which, in addition to increasing the combined company’s U.S. federal income tax liability, could adversely affect the combined company’s share price, financial condition, results of operations and cash flows.

Risks Relating to Cliffs’ Business

You should read and consider risk factors specific to Cliffs’ businesses that may also affect the combined company after the completion of the Merger. These risks are described in Part I, Item 1A of Cliffs’ Annual Report on Form 10-K for the year ended December 31, 2018, and in other documents that are incorporated by reference herein. See the section entitled “Where You Can Find More Information” beginning on page [    ] for the location of information incorporated by reference in this joint proxy statement/prospectus.

Risks Relating to AK Steel’s Business

You should read and consider risk factors specific to AK Steel’s businesses that may also affect the combined company after the completion of the Merger. These risks are described in Part I, Item 1A of AK Steel’s Annual Report on Form 10-K for the year ended December 31, 2018, and in other documents that are incorporated by reference herein. See the section entitled “Where You Can Find More Information” beginning on page [    ] for the location of information incorporated by reference in this joint proxy statement/prospectus.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The registration statement on Form S-4, of which this joint proxy statement/prospectus forms a part, and the documents filed with the SEC by AK Steel and Cliffs that are incorporated by reference herein, as well as oral statements made or to be made by AK Steel and Cliffs, include certain “forward-looking statements” within the meaning of, and subject to the safe harbor created by, Section 27A of the Securities Act and Section 21E of the Exchange Act, which are referred to as the safe harbor provisions. Words such as “anticipate,” “assume,” “believe,” “build,” “continue,” “create,” “design,” “estimate,” “expect,” “focus,” “forecast,” “future,” “goal,” “guidance,” “imply,” “intend,” “look,” “objective,” “opportunity,” “outlook,” “plan,” “position,” “potential,” “predict,” “project,” “prospective,” “pursue,” “seek,” “strategy,” “target,” “work,” “could,” “may,” “should,” “would,” “will” or the negative of such terms or other variations thereof and words and terms of similar substance used in connection with any discussion of future plans, actions, or events identify forward-looking statements with respect to the businesses, strategies and plans of AK Steel and Cliffs, their expectations relating to the Merger and their future financial condition and performance. Cliffs and AK Steel caution investors that any forward-looking statements are subject to risks and uncertainties that may cause actual results and future trends to differ materially from those matters expressed in or implied by such forward-looking statements. Investors are cautioned not to place undue reliance on forward-looking statements. Among the risks and uncertainties that could cause actual results to differ from those described in forward-looking statements are the following:

 

•

the risk that the Merger Agreement may be terminated in accordance with its terms and that the Merger may not be completed;

 

•

the possibility that Cliffs shareholders may not approve the Merger Agreement and the transactions contemplated by the Merger Agreement, including the issuance of Cliffs common shares in connection with the Merger;

 

•

the possibility that AK Steel stockholders may not adopt the Merger Agreement;

 

•

the risk that the parties may not be able to satisfy any or all of the conditions to the completion of the Merger in a timely manner or at all;

 

•

the risk that governmental agencies may require Cliffs to agree to certain restrictions on the combined company’s business in order to obtain the required regulatory approvals for the Merger, which may negatively impact the combined company’s results of operations;

 

•

the risk that the Merger may be less accretive than expected, or may be dilutive, to Cliffs’ earnings per share, which may negatively affect the market price of Cliffs common shares;

 

•

the possibility that Cliffs and AK Steel will incur significant transaction and other costs in connection with the Merger, which may be in excess of those anticipated by Cliffs or AK Steel;

 

•

the risk that the financing transactions to be undertaken in connection with the Merger have a negative impact on the combined company’s credit profile or financial condition;

 

•

the risk that Cliffs may fail to realize the benefits expected from the Merger;

 

•

the risk that the combined company may be unable to achieve anticipated synergies or that it may take longer than expected to achieve those synergies;

 

•

the risk that any announcements relating to, or the completion of, the Merger could have adverse effects on the market price of Cliffs common shares;

 

•

the risk related to any unforeseen liability and future capital expenditure of AK Steel or Cliffs;

 

•

the risk that litigation relating to the Merger may be brought against Cliffs, AK Steel or their respective directors;

 

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•

the risk that the Merger and its announcement or completion could have an adverse effect on the ability of Cliffs and AK Steel to retain customers, retain and hire key personnel and/or maintain relationships with their suppliers and business partners;

 

•

the risk of any changes in general economic, market or business conditions, or changes in the economic or financial condition of Cliffs and AK Steel; and

 

•

the risks to their operating results and businesses generally.

Such factors are difficult to predict and in many cases may be beyond the control of Cliffs and AK Steel. Cliffs’ and AK Steel’s forward-looking statements are based on assumptions that Cliffs and AK Steel, respectively, believe to be reasonable but that may not prove to be accurate. Consequently, all of the forward-looking statements Cliffs and AK Steel make in this document are qualified by the information contained in or incorporated by reference herein, including the information contained under this heading and the information detailed in Cliffs’ Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and its subsequent Quarterly Reports on Form 10-Q, and in AK Steel’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and AK Steel’s subsequent Quarterly Reports on Form 10-Q. See the section entitled “Where You Can Find More Information” beginning on page [    ].

Cliffs and AK Steel undertake no obligation to update or publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances that occur, or which they become aware of, except as required by applicable law or regulation. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

 

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INFORMATION ABOUT THE COMPANIES

Cleveland-Cliffs Inc.

200 Public Square

Suite 3300

Cleveland, OH 44114

Phone: 1-800-214-0739

Founded in 1847, Cliffs is the largest and oldest independent iron ore mining company in the United States. Cliffs is a major supplier of iron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota. In 2020, Cliffs expects to be the sole producer of HBI in the Great Lakes region with the development of its first production plant in Toledo, Ohio. Driven by the core values of safety, social, environmental and capital stewardship, Cliffs employees endeavor to provide all stakeholders with operating and financial transparency.

AK Steel Holding Corporation

9227 Centre Pointe Drive

West Chester, OH 45069

Phone: 513-425-5000

AK Steel was incorporated in Delaware in 1993. Through its wholly owned subsidiary, AK Steel Corporation, it is a leading producer of flat-rolled carbon, stainless and electrical steel products, primarily for the automotive, infrastructure and manufacturing, and distributors and converters markets. AK Steel’s downstream businesses also provide customer solutions with carbon and stainless steel tubing products, advanced-engineered solutions, tool design and build, hot- and cold-stamped steel components, and complex assemblies. As the successor to Armco Inc., AK Steel continues a rich history of creating leading-edge steel innovations that began in 1899.

Pepper Merger Sub Inc.

c/o Cleveland-Cliffs Inc.

200 Public Square

Suite 3300

Cleveland, OH 44114

Phone: 1-800-214-0739

Merger Sub is a direct, wholly owned subsidiary of Cliffs. Upon the completion of the Merger, Merger Sub will cease to exist. Merger Sub was incorporated in Delaware on November 26, 2019 for the sole purpose of effecting the Merger and to date has undertaken no activities other than those incident to its formation and the matters contemplated by the Merger Agreement in connection with the Merger.

 

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SPECIAL MEETING OF CLIFFS SHAREHOLDERS

Date, Time and Place

The Cliffs special meeting will be held at [                ] Eastern Time on [                ], 2020, at [                ].

Purpose of the Cliffs Special Meeting

The purpose of the Cliffs special meeting is as follows:

 

•

to consider and vote on the Cliffs merger proposal; and

 

•

if necessary, to consider and vote on the Cliffs adjournment proposal.

Cliffs will transact no other business at the Cliffs special meeting.

Recommendation of the Cliffs Board

The Cliffs board recommends that Cliffs shareholders vote:

 

1.

“FOR” the approval of the Cliffs merger proposal; and

 

2.

“FOR” the approval of the Cliffs adjournment proposal.

See the section entitled “The Merger—Recommendation of the Cliffs Board and Reasons for the Merger” beginning on page [    ].

Record Date; Shareholders Entitled to Vote

Only holders of record of issued and outstanding Cliffs common shares as of the close of business on [                ], 2020, the record date for the Cliffs special meeting, are entitled to notice of, and to vote at, the Cliffs special meeting or any adjournment or postponement of the Cliffs special meeting. As of the close of business on the record date, there were issued and outstanding a total of [                ] Cliffs common shares entitled to vote at the Cliffs special meeting. As of the close of business on January 24, 2020, approximately 1.8% of the issued and outstanding Cliffs common shares were held by Cliffs’ directors, executive officers and their affiliates.

Quorum; Required Votes; Abstentions and Broker Non-Votes

A quorum of Cliffs shareholders is necessary to hold a valid meeting. A quorum will exist at the Cliffs special meeting if shares representing not less than a majority of the voting power of Cliffs are present, in person or represented by proxy, with respect to any matter to be considered at the Cliffs special meeting. All shares represented by proxy are counted as present for purposes of establishing a quorum, including abstentions. Cliffs common shares held in “street name” will be counted as present for the purpose of determining the existence of a quorum at the Cliffs special meeting so long as the beneficial owner of the shares has given their bank, broker or other nominee voting instructions on at least one of the proposals brought before the Cliffs special meeting. The proposals for consideration at the Cliffs special meeting are considered “non-routine” matters under NYSE Rule 452, and, therefore, no “broker non-votes” can occur at the meeting. Cliffs common shares held in “street name” will not be counted as present for the purpose of determining the existence of a quorum if no instructions have been provided on how to vote on either of the proposals. Because both of the proposals for consideration at the Cliffs special meeting are considered “non-routine” under the NYSE rules, brokers will not be permitted to vote on any of the matters to be considered at the Cliffs special meeting unless they have received specific instructions from the beneficial owners. As a result, if your Cliffs common shares are held in “street name,” they will not be voted on any matter unless you affirmatively instruct your bank, broker or other nominee how to vote your Cliffs common shares in one of the ways indicated by your bank, broker or other nominee.

 

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If you are a holder of record of Cliffs common shares and you submit a properly executed proxy card, even if you do not vote for some or all of the proposals or vote to “ABSTAIN” in respect of some or all of the proposals, your Cliffs common shares will be counted for purposes of calculating whether a quorum is present at the Cliffs special meeting. Proxies that have been executed but do not reflect a vote on any proposal will be voted in accordance with the recommendation of the Cliffs board on such proposal. If additional votes must be solicited to approve the Cliffs merger proposal, it is expected that the Cliffs special meeting will be adjourned to solicit additional proxies.

Approval of the Cliffs merger proposal requires the affirmative vote of the holders of Cliffs common shares entitling them to exercise a majority of the voting power of Cliffs on the proposal. The failure to submit a proxy card or to vote in person at the Cliffs special meeting or the abstention from voting by Cliffs shareholders, or the failure of any Cliffs shareholder who holds shares in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee with respect to the Cliffs merger proposal, will have the same effect as a vote “AGAINST” the Cliffs merger proposal.

Approval of the Cliffs adjournment proposal requires the affirmative vote of the holders of a majority of the Cliffs common shares present in person or represented by proxy at the Cliffs special meeting, whether or not a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the Cliffs adjournment proposal, while the failure to submit a proxy card or to vote in person at the Cliffs special meeting, or the failure of any Cliffs shareholder who holds shares in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee on the Cliffs merger proposal and Cliffs adjournment proposal, will have no effect on the Cliffs adjournment proposal.

The matters to be voted on at the Cliffs special meeting are described in the section entitled “Cliffs Proposals” beginning on page [    ].

Methods of Voting

If your Cliffs common shares are registered in your name with Cliffs’ transfer agent, Broadridge Corporate Issuer Solutions, you are a shareholder of record with respect to those shares and you received printed proxy materials directly from us. If your shares are held in an account at a bank, broker or other similar organization, you are the “beneficial owner” of such shares and the printed proxy materials were forwarded to you by that organization. In that circumstance, the organization is considered the shareholder of record for purposes of voting at the Cliffs special meeting. As a beneficial owner, you have the right to instruct the organization how to vote the shares held in your account.

If you are a shareholder of record of Cliffs common shares, you may vote:

 

•

via the Internet by proxy by following the instructions provided until 11:59 p.m. Eastern Time on [                ], 2020;

 

•

by telephone by proxy by calling the toll-free telephone number located on the proxy card or available via the Internet until 11:59 p.m. Eastern Time on [                ], 2020;

 

•

by completing, signing and returning your proxy or voting instruction card and returning it in the provided envelope via mail. If you vote by mail, your proxy card must be received by 11:59 p.m. Eastern Time on [                ], 2020; or

 

•

in person at the Cliffs special meeting. You will be required to present a valid form of government-issued photo identification to be admitted to the Cliffs special meeting and a ballot will be provided to you upon arrival.

If you are a beneficial owner of Cliffs common shares held in “street name,” you may vote:

 

•

via the Internet by following the instructions provided to you by your bank, broker or other nominee;

 

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•

by telephone by calling the toll-free telephone number located on the voting instruction form or available via the Internet, provided to you by your bank, broker or other nominee;

 

•

by completing, signing and returning the voting instruction form and returning it in the provided envelope via mail provided to you by your bank, broker or other nominee; or

 

•

in person at the Cliffs special meeting but you must first obtain a legal proxy form from the bank, broker or other nominee that holds your Cliffs common shares. Please contact such broker or organization for instructions regarding obtaining a legal proxy. If you do obtain a legal proxy and plan to attend the Cliffs special meeting, you will be required to present a valid form of government-issued photo identification.

Cliffs provides Internet proxy voting to allow you to vote your shares online; however, please be aware you must bear any costs associated with your Internet access, such as usage charges from Internet access providers or telecommunication companies.

Voting in Person

Shareholders of record will need to have a valid form of government-issued photo identification to be admitted to the Cliffs special meeting. If your ownership is through a bank, broker or other nominee, then, in addition to a valid form of government-issued photo identification, you will also need to have proof of your share ownership to be admitted to the Cliffs special meeting. A recent account statement, letter or proxy from your bank, broker or other nominee will suffice. In order to vote at the Cliffs special meeting, if you are not an owner of record, you must first obtain a legal proxy form from the bank, broker or other nominee that holds your shares. Even if you plan to attend the Cliffs special meeting, the Cliffs board recommends that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the Cliffs special meeting.

Voting by Proxy

Whether you hold your shares directly as the shareholder of record or beneficially in “street name,” you may direct your vote by proxy without attending the Cliffs special meeting. You can vote by proxy via the Internet, by telephone or by mail by following the instructions provided in the enclosed proxy card if you are a shareholder of record or by following the instructions provided to you by your bank, broker or other nominee.

Questions About Voting

If you have any questions about how to vote or direct a vote in respect of your Cliffs common shares, you may contact Okapi Partners, Cliffs’ proxy solicitor, at:

 

•

Shareholders may call toll-free at +1-877-869-0171.

 

•

Banks and brokers may call collect at +1-212-297-0720.

Revocability of Proxies

If you are a shareholder of record of Cliffs, you may change your vote or revoke your proxy at any time before your shares are voted at the Cliffs special meeting by:

 

•

voting again via the Internet or by telephone;

 

•

sending a proxy card dated later than your last vote;

 

•

delivering a written notice to Cliffs’ Secretary at the address listed for Cliffs in the section entitled “Where You Can Find More Information” beginning on page [    ], stating that you are revoking your proxy; or

 

•

voting in person at the Cliffs special meeting.

 

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If you are a beneficial owner of Cliffs common shares, you must contact your bank, broker or other nominee with whom you have an account to obtain information regarding changing your voting instructions.

Proxy Solicitation Costs

The enclosed proxy card is being solicited on behalf of the Cliffs board. In addition to solicitation by mail, Cliffs’ directors, officers and employees may solicit proxies in person, by telephone or by electronic means. These persons will not be specifically compensated for doing this.

Cliffs has retained Okapi Partners to assist in the solicitation process. Cliffs will pay Okapi Partners a fee of approximately $50,000 as well as reasonable and documented out-of-pocket expenses. Cliffs also has agreed to indemnify Okapi Partners against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).

Cliffs will ask banks, brokers and other custodians, nominees and fiduciaries to forward the proxy solicitation materials to the beneficial owners of Cliffs common shares held of record by such nominee holders. Cliffs will reimburse these nominee holders for their customary clerical and mailing expenses incurred in forwarding the proxy solicitation materials to the beneficial owners.

Other Information

The matters to be considered at the Cliffs special meeting are of great importance to the shareholders of Cliffs. Accordingly, you are urged to read and carefully consider the information contained in or incorporated by reference into this joint proxy statement/prospectus and submit your proxy via the Internet or by telephone or complete, date, sign and promptly return the enclosed proxy card in the enclosed postage-paid envelope. If you submit your proxy via the Internet or by telephone, you do not need to return the enclosed proxy card.

Vote of Cliffs Directors and Executive Officers

As of the close of business on January 24, 2020, Cliffs directors and executive officers, and their affiliates, as a group, owned and were entitled to vote 4,976,945 Cliffs common shares, or approximately 1.8% of the total outstanding Cliffs common shares as of January 24, 2020. This is less than the number of Cliffs common shares beneficially owned by such persons as some forms of beneficial ownership do not confer voting rights.

Cliffs currently expects that all of its directors and executive officers will vote their shares “FOR” the Cliffs merger proposal and “FOR” the Cliffs adjournment proposal.

Attending the Cliffs Special Meeting

You are entitled to attend the Cliffs special meeting only if you were a shareholder of record of Cliffs at the close of business on the record date or if you held your Cliffs common shares beneficially in the name of a bank, broker or other nominee as of the record date, or you hold a valid proxy for the Cliffs special meeting from a shareholder who would otherwise be entitled to attend the meeting.

If you were a shareholder of record of Cliffs at the close of business on the record date and wish to attend the Cliffs special meeting, please so indicate on the appropriate proxy card or as prompted by the Internet or telephone voting system. Your name will be verified against the list of shareholders of record prior to your being admitted to the Cliffs special meeting.

If a bank, broker or other nominee is the record owner of your Cliffs common shares, you will need to have proof that you are the beneficial owner as of the record date to be admitted to the Cliffs special meeting. A recent statement or letter from your bank, broker or other nominee confirming your ownership as of the record date, or presentation of a valid proxy from a bank, broker or other nominee that is the record owner of your shares, would be acceptable proof of your beneficial ownership.

 

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You should be prepared to present government-issued photo identification for admittance to the Cliffs special meeting. If you do not provide government-issued photo identification or comply with the other procedures outlined above upon request, you might not be admitted to the Cliffs special meeting.

Results of the Cliffs Special Meeting

The preliminary voting results are expected to be announced at the Cliffs special meeting. In addition, within four business days following the Cliffs special meeting, Cliffs intends to file the final voting results with the SEC on a Current Report on Form 8-K. If the final voting results have not been certified within that four business day period, Cliffs will report the preliminary voting results on a Current Report on Form 8-K at that time and will file an amendment to the Current Report on Form 8-K to report the final voting results within four business days of the date that the final results are certified.

CLIFFS SHAREHOLDERS SHOULD CAREFULLY READ THIS JOINT PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY FOR MORE DETAILED INFORMATION CONCERNING THE CLIFFS MERGER PROPOSAL AND THE CLIFFS ADJOURNMENT PROPOSAL.

 

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CLIFFS PROPOSALS

Cliffs Merger Proposal

It is a condition to completion of the Merger that Cliffs shareholders approve the Merger Agreement and the transactions contemplated thereby, including the issuance of Cliffs common shares in connection with the Merger. In the Merger, each AK Steel stockholder will receive, for each share of AK Steel common stock that is issued and outstanding as of immediately prior to the effective time of the Merger, 0.400 Cliffs common shares (together with cash in lieu of any fractional Cliffs common shares and any dividends or distributions on the Cliffs common shares with a record date at or after the effective time of the Merger). See the section entitled “The Merger Agreement—Merger Consideration” beginning on page [    ] for more information.

Approval of the Cliffs merger proposal requires the affirmative vote of the holders of Cliffs common shares entitling them to exercise a majority of the voting power of Cliffs on the proposal. The failure to submit a proxy card or to vote in person at the Cliffs special meeting or the abstention from voting by Cliffs shareholders, or the failure of any Cliffs shareholder who holds shares in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee with respect to the Cliffs merger proposal, will have the same effect as a vote “AGAINST” the Cliffs merger proposal.

The Cliffs board recommends you vote “FOR” the Cliffs merger proposal.

Cliffs Adjournment Proposal

Cliffs shareholders are also being asked to approve a proposal to adjourn the Cliffs special meeting, if necessary, to solicit additional proxies in favor of the Cliffs merger proposal in the event there are not sufficient votes at the time of the Cliffs special meeting to approve the Cliffs merger proposal. If the Cliffs special meeting is adjourned for the purpose of soliciting additional proxies, shareholders who have already submitted their proxies will be able to revoke them at any time prior to their exercise at the adjourned meeting.

Approval of the Cliffs adjournment proposal requires the affirmative vote of the holders of a majority of the Cliffs common shares present in person or represented by proxy at the Cliffs special meeting, whether or not a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the Cliffs adjournment proposal, while the failure to submit a proxy card or to vote in person at the Cliffs special meeting, or the failure of any Cliffs shareholder who holds shares in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee on the Cliffs merger proposal and the Cliffs adjournment proposal, will have no effect on the Cliffs adjournment proposal.

The Cliffs board recommends you vote “FOR” the Cliffs adjournment proposal.

 

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SPECIAL MEETING OF AK STEEL STOCKHOLDERS

Date, Time and Place

The AK Steel special meeting will be held at [                ] Eastern Time on [                ], 2020, at [                ].

Purpose of the AK Steel Special Meeting

The purpose of the AK Steel special meeting is as follows:

 

•

to consider and vote on the AK Steel merger proposal;

 

•

to consider and vote, on an advisory, non-binding basis, on the AK Steel compensation proposal; and

 

•

if necessary, to consider and vote on the AK Steel adjournment proposal.

AK Steel will transact no other business at the AK Steel special meeting.

Recommendation of the AK Steel Board

The AK Steel board recommends that AK Steel stockholders vote:

 

1.

“FOR” the approval of the AK Steel merger proposal;

 

2.

“FOR” the approval of the AK Steel compensation proposal; and

 

3.

“FOR” the approval of the AK Steel adjournment proposal.

See the section entitled “The Merger—Recommendation of the AK Steel Board and Reasons for the Merger” beginning on page [    ].

Record Date; Stockholders Entitled to Vote

Only holders of record of shares of AK Steel common stock issued and outstanding as of the close of business on [                ], 2020, the record date for the AK Steel special meeting, are entitled to notice of, and to vote at, the AK Steel special meeting or any adjournment or postponement of the AK Steel special meeting. As of the close of business on the record date, there were issued and outstanding a total of [                ] shares of AK Steel common stock. As of the close of business on January 24, 2020, less than 1.0% of the issued and outstanding shares of AK Steel common stock were held by AK Steel’s directors, executive officers and their affiliates.

Quorum; Broker Non-Votes

A quorum of AK Steel stockholders is necessary to hold a valid meeting. A quorum will exist at the AK Steel special meeting if holders of record of shares of AK Steel common stock representing not less than a majority of the issued and outstanding shares of AK Steel common stock entitled to vote at the meeting are present, in person or represented by proxy. All shares of AK Steel common stock represented by proxy will be counted as present for purposes of establishing a quorum, including abstentions.

If you are a holder of record of shares of AK Steel common stock and you submit a properly executed proxy card for the AK Steel special meeting, your shares of AK Steel common stock will be counted for purposes of calculating whether a quorum is present at the meeting, even if you do not vote for some or all of the proposals or vote to “ABSTAIN” in respect of some or all of the proposals.

AK Steel stockholders who hold their shares in “street name” will be counted as present for the purpose of determining the existence of a quorum at the AK Steel special meeting so long as the stockholder has given their bank, broker or other nominee voting instructions on at least one of the proposals brought before the AK Steel

 

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special meeting. The proposals for consideration at the AK Steel special meeting are considered “non-routine” matters under NYSE Rule 452, and, therefore, brokers are not permitted to vote on any of the matters to be considered at the AK Steel special meeting unless they have received specific instructions from the beneficial owners with respect to such matter. As a result, no “broker non-votes” can occur at the meeting and shares of AK Steel common stock will not be counted as present for the purpose of determining the existence of a quorum if no instructions have been provided on how to vote on any of the proposals.

If additional votes must be solicited to approve the AK Steel merger proposal, it is expected that the AK Steel special meeting will be adjourned to allow sufficient time to solicit additional proxies.

Required Votes; Abstentions

Approval of the AK Steel merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of AK Steel common stock entitled to vote on the proposal. The failure to submit a proxy card or to vote in person at the AK Steel special meeting or voting to abstain on the AK Steel merger proposal, will have the same effect as a vote “AGAINST” the AK Steel merger proposal. The failure of any AK Steel stockholder who holds their shares in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee, will also have the same effect as a vote “AGAINST” the AK Steel merger proposal.

Approval of the AK Steel compensation proposal requires the affirmative vote of a majority of the shares of AK Steel common stock present in person or represented by proxy at the AK Steel special meeting and entitled to vote on the proposal. Abstentions will have the same effect as a vote “AGAINST” the AK Steel compensation proposal, while the failure to submit a proxy card or to vote in person at the AK Steel special meeting, or the failure of any AK Steel stockholder who holds their shares in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee with respect to all of the AK Steel proposals, will have no effect on the AK Steel compensation proposal, assuming a quorum is present at the AK Steel special meeting.

Approval of the AK Steel adjournment proposal requires the affirmative vote of a majority of the shares of AK Steel common stock present in person or represented by proxy at the AK Steel special meeting and entitled to vote on the proposal, whether or not a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the AK Steel adjournment proposal, while the failure to submit a proxy card or to vote in person at the AK Steel special meeting, or the failure of any AK Steel stockholder who holds common stock in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee with respect to all of the AK Steel proposals, will have no effect on the AK Steel adjournment proposal.

Executed proxies that do not include a vote on any proposal will be voted in accordance with the recommendation of the AK Steel board for such proposal. All of the proposals for consideration at the AK Steel special meeting are considered “non-routine” matters under NYSE Rule 452. As a result, if your shares of AK Steel common stock are held in “street name” they will not be voted on any matter unless you affirmatively instruct your bank, broker or other nominee how to vote your shares of AK Steel common stock in one of the ways indicated by your bank, broker or other nominee.

The matters to be voted on at the AK Steel special meeting are described in the section entitled “AK Steel Proposals” beginning on page [    ].

Methods of Voting

If your shares of AK Steel common stock are registered in your name with AK Steel’s transfer agent, Computershare, you are a stockholder of record with respect to those shares of common stock and you received printed proxy materials directly from us. If your shares of AK Steel common stock are held in an account at a bank, broker or other similar organization, you are the “beneficial owner” of such shares and the printed proxy

 

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materials were forwarded to you by that organization and your shares are considered to be held in “street name.” If your shares are held in “street name,” your bank, broker or other nominee is considered the stockholder of record for purposes of voting at the AK Steel special meeting. As a beneficial owner, you have the right to instruct the organization how to vote the shares of AK Steel common stock held in your account.

If you are a stockholder of record of AK Steel common stock as of the close of business on the record date, you may vote:

 

•

via the Internet by following the instructions provided on your proxy card until 11:59 p.m. Eastern Time on [                ], 2020;

 

•

by telephone by calling the toll-free telephone number located on the proxy card until 11:59 p.m. Eastern Time on [                ], 2020;

 

•

by completing, signing and returning the enclosed proxy card and returning it in the provided envelope via mail. If you vote by mail, your proxy card must be received by AK Steel’s Corporate Secretary by the close of business on [                ], 2020; or

 

•

in person at the AK Steel special meeting. You will be required to present a valid form of government-issued photo identification to be admitted to the AK Steel special meeting and a ballot will be provided to you upon arrival.

AK Steel provides Internet proxy voting to allow you to vote your shares online; however, please be aware you must bear any costs associated with your Internet access, such as usage charges from Internet access providers or telecommunication companies.

If you are a beneficial owner of AK Steel common stock held in “street name,” you may instruct your bank, broker or other nominee to vote your shares by following the instructions that the bank, broker or other nominee provides to you. Most brokers offer stockholders the ability to vote via the Internet, by telephone or by completing, signing and returning a voting instruction form. If your shares are held in “street name,” you may vote in person at the AK Steel special meeting but you must first obtain a legal proxy form from the bank, broker or other nominee that holds your AK Steel common stock. Please contact your broker or organization for instructions regarding obtaining a legal proxy. If you do obtain a legal proxy and plan to attend the AK Steel special meeting, you will be required to present a valid form of government-issued photo identification.

Voting in Person

AK Steel stockholders of record will need to have a valid form of government-issued photo identification to be admitted to and receive a ballot to vote at the AK Steel special meeting.

If your ownership is through a bank, broker or other nominee, then, in addition to a valid form of government-issued photo identification, you will also need to have proof of your ownership of AK Steel common stock to be admitted to the AK Steel special meeting. A recent account statement, letter or proxy from your bank, broker or other nominee will suffice. In order to vote at the AK Steel special meeting, if you are not an owner of record, you must also first obtain a legal proxy form from the bank, broker or other nominee that holds your AK Steel common stock. Even if you plan to attend the AK Steel special meeting, the AK Steel board recommends that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the AK Steel special meeting.

Voting by Proxy

If you hold your AK Steel common stock directly as the stockholder of record, you may direct your vote by proxy without attending the AK Steel special meeting. You can vote by proxy via the Internet, by telephone or by mail by following the instructions provided in the enclosed proxy card. If you hold your AK Steel shares beneficially in “street name,” you can instruct your bank, broker or other nominee how to vote by proxy by following the instructions provided to you by the bank, broker or other nominee.

 

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Voting by Participants in AK Steel Thrift Plans

If you hold shares of AK Steel common stock in an AK Steel thrift plan, you must timely provide the applicable plan trustee with voting instructions with respect to the shares you hold in such AK Steel thrift plan. If you do not provide the AK Steel thrift plan trustee with voting instructions, neither the AK Steel thrift plan trustee nor the applicable fiduciary committee for such AK Steel thrift plan will be able to vote the shares of AK Steel common stock held for your benefit through such AK Steel thrift plan at the AK Steel special meeting.

Questions About Voting

If you have any questions about how to vote your shares of AK Steel common stock, you may contact AK Steel’s proxy solicitor, Georgeson, toll-free at 1-866-413-5899.

Revocability of Proxies

If you are an AK Steel stockholder of record, you may change your vote or revoke your proxy by:

 

•

voting again via the Internet or by telephone before 11:59 p.m. Eastern Time on [                ], 2020;

 

•

sending an executed proxy card dated later than your last vote that is received by AK Steel’s Corporate Secretary before the close of business on [                ], 2020;

 

•

delivering a written notice to AK Steel’s Corporate Secretary at 9227 Centre Pointe Drive, West Chester, Ohio 45069, stating that you are revoking your proxy; or

 

•

voting in person at the AK Steel special meeting.

If you are a beneficial owner of AK Steel common stock, you must contact your bank, broker or other nominee with whom you have an account to obtain information regarding changing your voting instructions.

Proxy Solicitation Costs

The enclosed proxy card is being solicited on behalf of the AK Steel board. In addition to solicitation by mail, AK Steel’s directors, officers and employees may solicit proxies in person, by telephone or by electronic means. These persons will not be specifically compensated for doing this.

AK Steel has retained Georgeson to assist in the solicitation process. AK Steel will pay Georgeson a fee of approximately $17,500 as well as reasonable and documented out-of-pocket expenses. AK Steel also has agreed to indemnify Georgeson against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).

AK Steel will ask banks, brokers and other custodians, nominees and fiduciaries to forward the proxy solicitation materials to the beneficial owners of AK Steel common stock held of record by such nominee holders. AK Steel will reimburse these nominee holders for their customary clerical and mailing expenses incurred in forwarding the proxy solicitation materials to the beneficial owners.

Other Information

The matters to be considered at the AK Steel special meeting are of great importance to AK Steel stockholders. Accordingly, you are urged to read and carefully consider the information contained in or incorporated by reference into this joint proxy statement/prospectus and to submit your proxy via the Internet or by telephone or complete, date, sign and promptly return the enclosed proxy card in the enclosed postage-paid envelope, whether or not you plan to attend the AK Steel special meeting. If you submit your proxy via the Internet or by telephone, you do not need to return the enclosed proxy card.

 

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Vote of AK Steel Directors and Executive Officers

As of the close of business on January 24, 2020, AK Steel directors and executive officers and their respective affiliates, as a group, owned and were entitled to vote 2,791,687 shares of AK Steel common stock, representing less than 1.0% of the total number of shares AK Steel common stock outstanding as of January 24, 2020.

AK Steel currently expects that all of its directors and executive officers will vote their shares “FOR” the AK Steel merger proposal, “FOR” the AK Steel compensation proposal and “FOR” the AK Steel adjournment proposal.

Attending the AK Steel Special Meeting

You are entitled to attend the AK Steel special meeting only if you were a stockholder of record of AK Steel at the close of business on the record date or you held your shares of AK Steel common stock beneficially in the name of a bank, broker or other nominee as of the record date, or you hold a valid proxy from a record holder of AK Steel common stock for the AK Steel special meeting.

If a bank, broker or other nominee is the record owner of your AK Steel common stock, you will need to have proof that you were the beneficial owner of those shares as of the record date to be admitted to the AK Steel special meeting. A recent statement or letter from your bank, broker or other nominee confirming your ownership as of the record date, or presentation of a valid proxy from a bank, broker or other nominee that is the record owner of your shares, would be acceptable proof of your beneficial ownership.

You should be prepared to present government-issued photo identification for admittance to the AK Steel special meeting. If you do not provide government-issued photo identification or comply with the other procedures outlined above upon request, you might not be admitted to the AK Steel special meeting.

Results of the AK Steel Special Meeting

The preliminary voting results are expected to be announced at the AK Steel special meeting. In addition, within four business days following the AK Steel special meeting, AK Steel intends to file the final voting results with the SEC on a Current Report on Form 8-K. If the final voting results have not been certified within that four business day period, AK Steel will report the preliminary voting results on a Current Report on Form 8-K at that time and will file an amendment to the Current Report on Form 8-K to report the final voting results within four business days of the date that the final results are certified.

AK STEEL STOCKHOLDERS SHOULD CAREFULLY READ THIS JOINT PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY FOR MORE DETAILED INFORMATION CONCERNING THE AK STEEL MERGER PROPOSAL AND THE OTHER MATTERS TO BE VOTED ON AT THE AK STEEL SPECIAL MEETING.

 

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AK STEEL PROPOSALS

AK Steel Merger Proposal

It is a condition to completion of the Merger that AK Steel’s stockholders adopt the Merger Agreement. In the Merger, each AK Steel stockholder will be entitled to receive, for each share of AK Steel common stock that is issued and outstanding as of immediately prior to the effective time of the Merger, 0.400 Cliffs common shares (together with cash in lieu of any fractional Cliffs common shares and any applicable dividends or distributions on the Cliffs common shares with a record date at or after the effective time of the Merger). See the section entitled “The Merger Agreement—Merger Consideration” beginning on page [    ] for more information.

Approval of the AK Steel merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of AK Steel common stock entitled to vote on the proposal. The failure to submit a proxy card or to vote in person at the AK Steel special meeting, an “ABSTAIN” vote on the AK Steel merger proposal, or the failure of any AK Steel stockholder who holds shares of AK Steel common stock in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee, will have the same effect as a vote “AGAINST” the AK Steel merger proposal.

The AK Steel board recommends you vote “FOR” the AK Steel merger proposal.

AK Steel Compensation Proposal

AK Steel is asking its stockholders to vote to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to AK Steel’s named executive officers that is based on or otherwise relates to the Merger, as described in the section entitled “The Merger—Interests of AK Steel Directors and Executive Officers in the Merger—Merger-Related Compensation for AK Steel’s Named Executive Officers” beginning on page [    ]. This non-binding, advisory vote is required by Section 14A of the Exchange Act and the applicable SEC rules issued thereunder, which were enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.

As an advisory vote, this proposal is not binding upon AK Steel or the AK Steel board and approval of this proposal is not a condition to the completion of the Merger. Because the compensation that may be paid or become payable to AK Steel’s named executive officers in connection with the Merger is based on the terms of the Merger Agreement as well as contractual arrangements with AK Steel’s named executive officers, such compensation will be payable to AK Steel’s named executive officers regardless of the outcome of this advisory vote, as long as the Merger Agreement is adopted and the Merger is completed (subject only to the contractual conditions applicable thereto). However, AK Steel seeks the support of its stockholders and believes that stockholder support is appropriate because AK Steel has a comprehensive executive compensation program designed to link the compensation of its executives with AK Steel’s performance and the interests of AK Steel stockholders. Accordingly, at the AK Steel special meeting, AK Steel stockholders are being asked to vote on the following resolution:

“RESOLVED, that the compensation that may be paid or become payable to the named executive officers of AK Steel Holding Corporation that is based on or otherwise relates to the Merger, as disclosed pursuant to Item 402(t) of Regulation S-K under the heading “Merger-Related Compensation for AK Steel’s Named Executive Officers” in the joint proxy statement/prospectus, including the associated narrative discussion, and the agreements, plans and other arrangements pursuant to which such compensation may be paid or become payable, be, and are hereby, APPROVED.”

Approval of the non-binding AK Steel compensation proposal requires the affirmative vote of a majority of the shares of AK Steel common stock present in person or represented by proxy at the AK Steel special meeting and entitled to vote on the proposal. Abstentions will have the same effect as a vote “AGAINST” the AK Steel compensation proposal, while the failure to submit a proxy card or to vote in person at the AK Steel special meeting, or the failure of any AK Steel stockholder who holds their shares in “street name” through a bank,

 

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broker or other nominee to give voting instructions to such bank, broker or other nominee with respect to all of the AK Steel proposals, will have no effect on the AK Steel compensation proposal, assuming a quorum is present at the AK Steel special meeting.

The AK Steel board recommends that you vote “FOR” the AK Steel compensation proposal.

AK Steel Adjournment Proposal

AK Steel stockholders are also being asked to approve a proposal to adjourn the AK Steel special meeting to solicit additional proxies in favor of the AK Steel merger proposal in the event there are not sufficient votes at the time of the AK Steel special meeting to approve the AK Steel merger proposal. If the AK Steel special meeting is adjourned for the purpose of soliciting additional proxies, stockholders who have already submitted their proxies will be able to revoke them at any time prior to their exercise at the adjourned meeting.

Approval of the AK Steel adjournment proposal requires the affirmative vote of the holders of a majority of the shares of AK Steel common stock present in person or represented by proxy at the AK Steel special meeting and entitled to vote on the proposal, whether or not a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the AK Steel adjournment proposal, while the failure to submit a proxy card or to vote in person at the AK Steel special meeting, or the failure of any AK Steel stockholder who holds AK Steel common stock in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee with respect to all of the AK Steel proposals, will have no effect on the AK Steel adjournment proposal.

The AK Steel board recommends you vote “FOR” the AK Steel adjournment proposal.

 

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THE MERGER

This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this joint proxy statement/prospectus as Annex A and incorporated by reference herein in its entirety. You should read the entire Merger Agreement carefully as it is the legal document that governs the Merger.

Transaction Structure

At the effective time of the Merger, Merger Sub will merge with and into AK Steel. As a result of the Merger, the separate corporate existence of Merger Sub will cease and AK Steel will continue as the surviving corporation and as a direct, wholly owned subsidiary of Cliffs.

Consideration to AK Steel Stockholders

As a result of the Merger, each share of AK Steel common stock issued and outstanding immediately prior to the effective time of the Merger (other than excluded shares, as defined below) will be converted into the right to receive the merger consideration of 0.400 Cliffs common shares as well as cash in lieu of any fractional Cliffs common shares as described below.

AK Steel stockholders will not be entitled to receive any fractional Cliffs common shares in the Merger, and no AK Steel stockholders will be entitled to any dividends or have any voting rights or any other rights in respect of any fractional Cliffs common shares. AK Steel stockholders that would have otherwise been entitled to receive a fractional Cliffs common share in the Merger will instead be entitled to receive, in lieu of fractional shares, an amount in cash, without interest, equal to the product of the average of the closing prices per Cliffs common share on the NYSE, as reported by The Wall Street Journal (or if not reported thereby, as reported in another authoritative source), for the five full trading days ending on the second business day immediately preceding the date on which the effective time of the Merger occurs, multiplied by the fraction of a Cliffs common share (after taking into account all of the shares of AK Steel common stock held by the holder at the effective time of the Merger and rounded to the nearest one thousandth) to which the holder would otherwise be entitled.

At the effective time of the Merger, all shares of AK Steel common stock (other than excluded shares) will cease to be outstanding and will automatically be cancelled and will cease to exist, and each certificate formerly representing any shares of AK Steel common stock, and each non-certificated share of AK Steel common stock represented by book entry will thereafter represent only the right to receive, without interest, the merger consideration, and the right, if any, to receive cash in lieu of any fractional Cliffs common shares into which such shares would have been converted and any distribution or dividend on Cliffs common shares issued in the Merger with a record date at or after the effective time of the Merger.

Restricted shares of AK Steel common stock and shares of AK Steel common stock owned as of immediately prior to the effective time of the Merger by Cliffs, Merger Sub or AK Steel (other than any shares of AK Steel common stock held by Cliffs, Merger Sub or AK Steel on behalf of third parties), which are referred to as the excluded shares, will be cancelled and will cease to exist, and no Cliffs common shares or other consideration will be delivered in exchange therefor (except with respect to AK Steel restricted shares which will be treated as described below under “The Merger Agreement—Treatment of Outstanding AK Steel Equity Awards in the Merger—Treatment of AK Steel Restricted Shares” beginning on page [     ]).

Background of the Merger

The senior management team and board of directors of AK Steel regularly review and discuss AK Steel’s performance, strategy, competitive position and strategic options, and, from time to time, include AK Steel’s legal and financial advisors in such review and discussions. In this regard, AK Steel regularly reviews and evaluates potential strategic alternatives as part of its ongoing efforts to strengthen and grow its overall business and to enhance value for its stockholders.

 

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Over the past several years, AK Steel has pursued a strategic agenda focused on working to transform its cost structure and operations with the goal of improving its competitive position and liquidity, decreasing its indebtedness and delivering value to its stockholders. As part of this strategic agenda, the AK Steel board and senior management team have evaluated a range of possible alternatives, taking into account, among other things, AK Steel’s existing operations, strategic priorities and capital requirements.

In early May 2018, Roger K. Newport, Chief Executive Officer of AK Steel, raised the possibility of Cliffs and AK Steel engaging in a strategic transaction with Lourenco Goncalves, Chairman, President and Chief Executive Officer of Cliffs. Mr. Newport inquired whether Mr. Goncalves would consider a potential joint venture involving the companies, focused on finding a potentially more productive use for one of AK Steel’s underperforming assets. In addition, Mr. Newport suggested that the companies might consider a more transformative transaction, as such an arrangement would secure for AK Steel reliable access to its most important raw material, while ensuring a long-term, dedicated customer for Cliffs. Mr. Goncalves indicated that, while he had not previously considered such a transaction, he could appreciate its strategic benefits and the potential value to both companies and would reflect on the idea.

There were no further discussions between the companies regarding potential joint venture opportunities, or any other material transaction, until mid-October 2018 when, at the request of Mr. Newport, Maurice A. Reed, Vice President, Strategic Planning and Business Development of AK Steel, contacted Mr. Goncalves to propose a meeting to discuss a potential joint venture opportunity involving AK Steel’s Ashland Works blast furnace. However, by late 2018, members of AK Steel management had concluded that, at that time, it was not economically feasible to implement the potential transaction in a manner that would generate meaningful value for AK Steel.

During the same period, the AK Steel board continued to evaluate and engage in discussions with members of AK Steel management and AK Steel’s legal and financial advisors with respect to, potential strategic alternatives available to AK Steel. At the AK Steel board’s October 18, 2018 meeting, members of AK Steel management reviewed with the AK Steel board various potential alternatives, including joint venture transactions involving several different U.S. and foreign steel producers and manufacturers that presented potential opportunities to (i) lower AK Steel’s costs of production, including through the sourcing of various raw materials, (ii) expand AK Steel’s scale and footprint, (iii) explore new alternatives both within and outside its existing footprint, (iv) create synergies through combining or optimizing production capabilities, (v) grow AK Steel’s downstream operations, (vi) make significant capital and other investments, including building or installing new technology in its existing mills, and (vii) improve the utilization of certain underperforming assets. During this meeting, members of AK Steel management also provided their views regarding the potential to pursue a more transformative transaction with certain of these identified joint venture counterparties, as well as other potential counterparties that may have interest in a significant transaction involving AK Steel. AK Steel management’s views were informed in part by certain in-depth and high-level discussions that AK Steel management had engaged in during 2017 and 2018 (and would continue to engage in during 2019) with over a dozen companies in the steel industry regarding potential joint venture and other opportunities for AK Steel to generate commercial and strategic value. In the course of certain of these discussions, AK Steel management, with the support of the AK Steel board, raised the possibility of undertaking a more transformative transaction, including a potential merger, sale or similar business combination. However, in each instance where AK Steel identified a transformative transaction that had the potential for execution, the potential counterparty indicated that, given its strategic agenda, the potential counterparty was not interested in pursuing such a transformative transaction, either at that time or at all.

During the latter part of 2018 (following the AK Steel board’s October 18, 2018 meeting) and the first half of 2019, AK Steel asked Goldman Sachs & Co. LLC, which is referred to as Goldman Sachs, and Credit Suisse Securities (USA) LLC, which is referred to as Credit Suisse, as well as a global management consulting firm to separately review potential strategic alternatives available to AK Steel, including the identification of potential counterparties to a transformative transaction involving AK Steel. None of these reviews, however, identified any potential counterparties that the AK Steel board and management viewed as likely having interest in pursuing an

 

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executable transaction that would generate meaningful value for AK Steel stockholders that had not already been considered or pursued by AK Steel.

As part of AK Steel’s continued evaluation of strategic alternatives, in November 2018 members of AK Steel management commenced discussions with a North American steel producer, which is referred to as Company A, with respect to a potential “merger of equals” transaction involving AK Steel and Company A. Over the next eleven months, AK Steel and Company A periodically engaged in a reciprocal due diligence review of their respective companies as well as preliminary negotiations regarding a potential transaction, including governance terms. AK Steel and Company A entered into a non-disclosure agreement, effective March 5, 2019, in connection with their consideration of the potential transaction, which included a customary mutual standstill provision that did not preclude private proposals to be made to the board of directors of the other party. AK Steel engaged Credit Suisse as its financial advisor in connection with a potential transaction involving Company A pursuant to an engagement letter effective February 1, 2019, while the AK Steel board worked with Goldman Sachs as its financial advisor. However, after further consideration, including unaddressed concerns regarding whether the potential transaction would improve AK Steel’s cost position and strengthen its credit profile, in September 2019, the AK Steel board, in consultation with management and AK Steel’s financial advisors, Credit Suisse and Goldman Sachs, determined not to proceed further with a potential transaction with Company A.

The AK Steel board also considered a potential transaction involving a different North American steel producer, which is referred to as Company B, with which AK Steel had previously discussed a potential combination and engaged in a reciprocal due diligence review in late 2016 and early 2017 before the AK Steel board determined in March 2017 that, at the time, pursuing a potential transaction with Company B was not in the best interests of AK Steel and its stockholders. In early April 2019, at the direction of the AK Steel board, Mr. Newport contacted the chief executive officer of Company B, who indicated he would be open to considering a potential transaction. However, after further consideration, in May 2019, the AK Steel board determined that it did not believe a transaction involving Company B would generate sufficient value for AK Steel stockholders in light of the risks associated with combining the companies and, accordingly, did not pursue any further discussions.

On August 20, 2019, Mr. Goncalves contacted Mr. Newport and indicated that Cliffs was interested in acquiring AK Steel’s Ashland Works blast furnace. Over the next few weeks, Mr. Goncalves and Mr. Newport engaged in a few additional preliminary discussions regarding the potential sale of the Ashland Works blast furnace.

On September 26, 2019, Mr. Newport and Mr. Goncalves spoke again to discuss next steps with respect to the potential sale of the Ashland Works blast furnace.

On September 27, 2019, Traci Forrester, Executive Vice President, Business Development of Cliffs, sent a proposed non-disclosure agreement for the potential acquisition by Cliffs of the Ashland Works blast furnace to Joseph C. Alter, Vice President, General Counsel and Corporate Secretary of AK Steel, which the parties finalized and entered into effective as of that same day.

On October 2, 2019, Mr. Newport and Mr. Goncalves met in Washington D.C. to discuss the status of the potential sale of the Ashland Works blast furnace, including the potential timeline for Cliffs to conduct its due diligence review and for the parties to negotiate and finalize the documentation for the transaction, as well as to obtain their requisite internal approvals. During this meeting, Mr. Goncalves and Mr. Newport again discussed the potential for (and agreed that it would be beneficial to both companies to continue discussions regarding) a more transformative transaction involving their companies, but decided at that time to focus on the proposed Ashland Works blast furnace transaction.

During the next two weeks, representatives of Cliffs and its advisors continued to conduct their due diligence review of the potential Ashland Works blast furnace transaction, including performing site visits to the Ashland Works facility.

 

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During early October 2019, Cliffs informed its legal counsel, Jones Day, that Cliffs was considering the potential acquisition of AK Steel in its entirety. Cliffs also informed Moelis of, and commenced working with Moelis in connection with, the potential transaction. Cliffs subsequently entered into an engagement letter with Moelis dated November 27, 2019.

On October 14, 2019, representatives of Goldman Sachs (including certain members of the team that would advise AK Steel in connection with the potential transaction) informally discussed with members of the Cliffs management team certain asset-based lending considerations, funding options and strategic growth opportunities for Cliffs. AK Steel was identified in the materials used by Goldman Sachs in such meeting as one of thirteen companies that presented potential strategic growth opportunities for Cliffs. Goldman Sachs’ materials included only publicly available information (e.g., market capitalization, enterprise value, 2019E EBITDA/multiple and indebtedness information) and did not contain potential price ranges, synergy calculations, or other transaction-specific information.

On October 16, 2019, certain members of Cliffs’ management team and representatives from Moelis and Jones Day met to discuss the possibility of a potential acquisition of AK Steel.

On October 17, 2019, Mr. Goncalves contacted Mr. Newport to discuss the status and timeline of the potential sale of the Ashland Works blast furnace. During this discussion, Mr. Goncalves informed Mr. Newport that the Cliffs management team had continued to consider the possibility of a more transformative transaction as previously discussed with Mr. Newport, and at the upcoming Cliffs board meeting on October 21, 2019, the Cliffs board would discuss potentially making an offer for Cliffs to acquire AK Steel. Mr. Goncalves and Mr. Newport then proceeded to further discuss the potential value creation opportunities for Cliffs shareholders and AK Steel stockholders in connection with such a transaction, as well as Cliffs’ expectations regarding the potential timeline should such a transaction occur. Mr. Newport informed Mr. Goncalves that the AK Steel board had a regularly scheduled board meeting from October 23 to October 25, 2019, and that he would discuss with the AK Steel directors any offer that Cliffs might make at that time.

On October 19, 2019, at the request of AK Steel’s then Chief Financial Officer, a representative of Credit Suisse provided the then Chief Financial Officer and Mr. Newport with materials, based solely on publicly available information, containing a high level overview of Cliffs and certain other illustrative data, assuming a transaction between AK Steel and Cliffs. The overview identified Cliffs’ management team, its geographic footprint, facilities and other operational information, Cliffs’ current capitalization and market performance and certain financial information. The materials also included illustrative exchange ratio and pro forma ownership data based on the companies’ respective trading prices over the prior two years and certain illustrative financial metrics that would result from a combination of the two companies based on publicly available information and broker consensus estimates of the companies’ respective future performance. The materials also included information regarding the premia paid in all-stock transactions involving consideration of greater than $500 million since 2010.

Later in October 2019, Mr. Alter informed AK Steel’s outside legal counsel, Weil, about the potential transaction with Cliffs. AK Steel also commenced working with Goldman Sachs in connection with the potential transaction. Prior to AK Steel commencing work with Goldman Sachs in connection with the potential transaction involving Cliffs, Goldman Sachs informed AK Steel that representatives of Goldman Sachs (including members of its proposed team to advise AK Steel in connection with the potential transaction) had assisted Cliffs on several financing transactions and from time to time provided Cliffs with advice with respect to strategic matters over the past several years. Subsequently, on November 15, 2019, representatives of Goldman Sachs provided a letter to the AK Steel board that disclosed certain relationships between Goldman Sachs and Cliffs with respect to past financing transactions and confirmed that nothing would limit Goldman Sachs’ ability to fulfill its responsibilities as financial advisor to AK Steel in connection with the potential transaction. AK Steel decided to work with Goldman Sachs in connection with the potential transaction based on its substantial experience in transactions similar to the proposed transaction, its familiarity with the steel industry and the AK

 

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Steel board’s view that Goldman Sachs had delivered excellent service during prior engagements with AK Steel, including during its consideration of a potential transaction involving Company A. AK Steel subsequently entered into an engagement letter with Goldman Sachs on November 27, 2019.

On October 21, 2019, the Cliffs board held its regularly scheduled meeting, which was attended by members of Cliffs management and representatives of Jones Day. The Cliffs board considered and discussed with members of Cliffs management a potential transaction with AK Steel, including the potential synergies of combining Cliffs and AK Steel and the potential upsides and potential challenges of a transaction with AK Steel. The Cliffs board then reviewed with members of Cliffs management and representatives of Jones Day a potential timeline for making an offer to acquire AK Steel and the transaction generally and considered the likely negotiation points to be resolved should the parties pursue a transaction. The members of the Cliffs board engaged in further discussions before it unanimously approved moving forward with submitting to AK Steel a non-binding proposal for the acquisition of AK Steel.

Later on October 21, 2019, on behalf of the Cliffs board, Mr. Goncalves delivered to Mr. Newport a written proposal, which is referred to as the October 21 proposal, for Cliffs’ acquisition of AK Steel in a stock-for-stock transaction with a fixed exchange ratio of 0.359 Cliffs common shares for each share of AK Steel common stock, which represented a premium of 10% to the thirty-day volume weighted average trading price for AK Steel common stock as of October 18, 2019, and would result in AK Steel stockholders, in their capacity as such, owning approximately 30% of the combined company immediately following the completion of the proposed transaction. The October 21 proposal indicated that Cliffs (i) believed two to three weeks would provide sufficient time for Cliffs and AK Steel to complete their respective reciprocal due diligence reviews, (ii) envisioned being in a position to sign a definitive agreement and announce a transaction by the first week of December, and (iii) required a response from AK Steel by 5:00 pm Eastern Time on October 30, 2019.

The AK Steel board held its regularly scheduled meeting at AK Steel’s headquarters in West Chester, Ohio from October 23 to October 25, 2019. During the course of these meetings, members of AK Steel management and representatives of Goldman Sachs reviewed with the AK Steel board their preliminary perspectives on the proposed transaction, as well as certain publicly available information and analyst reports regarding Cliffs. The materials reviewed with the AK Steel board by AK Steel management during its October 23, 2019 meeting included certain high-level information concerning Cliffs that was based, in part, on information previously reviewed with AK Steel’s then Chief Financial Officer and Mr. Newport on October 19, 2019, as described above.

In late October, Cliffs engaged Credit Suisse to, alongside Moelis, provide financial advisory services to Cliffs in connection with the potential transaction. Prior to being engaged by Cliffs, AK Steel provided Credit Suisse its consent for Credit Suisse (including members of the deal team that had previously provided formal and informal advice to AK Steel) to be engaged by Cliffs in connection with the Merger, and Credit Suisse agreed not to disclose to Cliffs any confidential information that Credit Suisse had received in connection with its prior work with AK Steel. Prior to Cliffs commencing work with Credit Suisse, Credit Suisse disclosed to Cliffs that Credit Suisse (including members of its proposed team to advise Cliffs in connection with the potential transaction) had assisted AK Steel on a number of confidential matters over the past several years. Credit Suisse also informed Cliffs that in October 2019 (prior to Credit Suisse being engaged by Cliffs) members of AK Steel management had discussed a potential transaction between AK Steel and Cliffs with certain representatives of Credit Suisse on an informal, non-engagement basis, and that Credit Suisse had provided certain high-level materials to AK Steel management that were based on publicly available information. Cliffs subsequently entered into an engagement letter with Credit Suisse effective as of October 27, 2019.

On October 29, 2019, a special telephonic meeting of the AK Steel board was held, which was attended by members of AK Steel management and representatives of Goldman Sachs, to further discuss the proposed transaction with Cliffs, including the terms of the October 21, 2019 proposal, perspectives regarding the appropriate premium payable with respect to AK Steel shares and the strategic rationale for the proposed

 

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transaction. During the meeting, members of AK Steel management also discussed with the AK Steel board their preliminary synergy assessments as well as certain considerations with respect to AK Steel’s and the combined company’s indebtedness. Representatives of Goldman Sachs also reviewed with the AK Steel board a comparison of Cliffs’ and AK Steel’s relative trading and market performance. Following these discussions, the AK Steel board agreed that a transaction with Cliffs could be beneficial to AK Steel stockholders, but that the proposed exchange ratio was too low for the board to conclude that such a combination would be in the best interests of AK Steel stockholders. After receiving and considering advice from its advisors, the AK Steel board discussed its initial view that an appropriate pro forma ownership for the combined company would involve AK Steel stockholders owning in the mid-30 percent range of the outstanding stock of the combined company. The AK Steel board then authorized Mr. Newport to continue to explore a potential combination with Cliffs on a non-binding basis, with the understanding that further discussions would need to be had with Cliffs to convey the AK Steel board’s belief that the proposed valuation was too low. The AK Steel board requested that a meeting be arranged between Ralph S. Michael, III, Chairman of the AK Steel board, and Mr. Goncalves to discuss various matters related to the proposed transaction.

On October 30, 2019, Mr. Newport spoke with Mr. Goncalves and informed him that the AK Steel board supported exploring a potential combination of Cliffs and AK Steel. Mr. Newport also conveyed the AK Steel board’s view regarding the proposed exchange ratio and ownership composition of the combined company. During the call, Mr. Newport and Mr. Goncalves discussed certain considerations with respect to the potential premium to be paid by Cliffs in the transaction, whether there was a possibility of AK Steel stockholders receiving some portion of the transaction consideration in cash and the AK Steel stockholders’ pro forma ownership of the combined Company. Mr. Goncalves and Mr. Newport decided that Cliffs’ and AK Steel’s respective financial advisors should continue discussions with respect to the proposed form and amount of consideration. Mr. Newport and Mr. Goncalves also discussed timing for the commencement of their respective company’s due diligence reviews and agreed to schedule a meeting between Mr. Goncalves and Mr. Michael, as the respective Chairmen of Cliffs and AK Steel.

Later on October 30, 2019, James Graham, Executive Vice President, Chief Legal Officer & Secretary of Cliffs, sent a proposed bilateral non-disclosure agreement for the potential transaction to Mr. Alter. AK Steel and Cliffs entered into the non-disclosure agreement on November 1, 2019.

On November 4, 2019, at the request of the AK Steel board, Messrs. Michael and Goncalves, the respective Chairmen of AK Steel and Cliffs, met in Cincinnati, Ohio to discuss the potential transaction, including the potential strategic rationale for the combination and the form and amount of consideration to be received by AK Steel stockholders, including the potential pro forma ownership of the combined company. Messrs. Michael and Goncalves also discussed certain corporate governance matters, including the inclusion of AK Steel board members on the combined company’s board to ensure the board had representation from individuals familiar with AK Steel’s business, which, as had previously been discussed, was important from the perspective of the AK Steel board, and Cliffs’ offer to include three AK Steel board members on the combined company’s board. During the course of their discussion, Mr. Michael indicated that the AK Steel board believed that the AK Steel stockholders’ pro forma ownership in the combined company would need to be in the mid-30 percent range in order for the AK Steel board to be supportive of a transaction. Mr. Goncalves indicated that the Cliffs board was of the view that the transaction should include a fixed exchange ratio and that the Cliffs board was supportive of a valuation that would result in AK Steel stockholders having a pro forma ownership percentage of 30%. Mr. Michael also indicated it may be beneficial for Mr. Goncalves to be available to make a presentation to the AK Steel board at the AK Steel board’s final meeting to consider the proposed transaction. Neither during this meeting nor during prior or subsequent discussions among the parties in connection with the potential transaction were post-closing employment arrangements negotiated or agreed to with any members of AK Steel management.

Messrs. Newport and Goncalves spoke by telephone on each of November 5, 2019 and November 7, 2019 to discuss the status of the proposed transaction, including progress with respect to the bilateral due diligence process, their respective board review and approval processes and overall timing for the potential transaction. On

 

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November 5, 2019, Cliffs and AK Steel each provided the other party and their respective advisors with access to an electronic data room containing certain non-public information regarding such company. On November 8, 2019, Cliffs provided AK Steel the preliminary Cliffs unaudited forecasted financial information and AK Steel provided Cliffs certain preliminary forecasted information regarding AK Steel.

On November 8, 2019, members of management of Cliffs and AK Steel, as well as representatives of Weil and Jones Day, held a diligence call to discuss certain capital structure considerations in connection with the potential transaction. During the period commencing on November 7, 2019 through the execution of the Merger Agreement on December 2, 2019, AK Steel and Cliffs continued to conduct their business and financial due diligence reviews, with the assistance of their respective external advisors. In addition to customary diligence regarding finance, legal, tax, accounting, environmental, reserves, human resources, operations and related diligence matters, the parties focused considerable efforts on the collective identification and validation of potential synergies and understanding their respective capital structures and the impact of various sensitivities to their financial forecasts, including the potential impact of each company’s outstanding indebtedness on the structure of the transaction as well as the indebtedness of the combined company.

On November 13, 2019, members of management of Cliffs and AK Steel, together with representatives of Moelis, Credit Suisse, Jones Day, Goldman Sachs and Weil, met at Jones Day’s office in Columbus, Ohio. At the meeting, Cliffs and AK Steel each provided the other with a management presentation regarding its business. During their respective management presentations, AK Steel and Cliffs also reviewed with each other their respective preliminary five-year financial projections, which had been previously made available. The parties, with the assistance of their respective financial advisors, also subsequently engaged in a series of discussions regarding certain differences in the underlying assumptions used in preparing their respective financial projections. Upon consideration of the widely fluctuating nature of certain commodity prices that form key assumptions in AK Steel’s and Cliffs’ respective financial forecasts, and following consultation with representatives of Goldman Sachs, AK Steel management determined to subsequently revise its preliminary projections using commodity pricing assumptions that were based on a combination of its own macro-assumptions, the assumptions used by Cliffs in the Cliffs unaudited forecasted financial information and information from three other recognized third party sources in order to avoid over-reliance on any one source in its financial projections.

On November 14, 2019, Mr. Goncalves contacted Mr. Newport by telephone to follow up on their discussion the prior day with respect to certain financial sensitivity analyses and the underlying assumptions therefor as well as certain other considerations in connection with the potential transaction as well as Mr. Goncalves’ view regarding Cliffs’ outreach to rating agencies.

On November 15, 2019, the Cliffs board held a telephonic meeting, with members of Cliffs management and representatives of Jones Day in attendance. During the Cliffs board meeting, members of the Cliffs management team and representatives of Jones Day provided the Cliffs board with an update on the management presentations that had occurred on November 13, 2019 and on the status of the potential transaction, including the status of Cliffs’ due diligence efforts to date. The Cliffs board considered AK Steel’s financial position, the expected combined EBITDA performance of Cliffs and AK Steel, the potential synergies, the severance and change of control payments that may be owed to officers and other key employees of AK Steel as a result of the transaction, and the transaction structure. Members of the Cliffs management team indicated that Cliffs planned to meet with the rating agencies to obtain a private analysis of the likely impact of the acquisition of AK Steel on the credit ratings of Cliffs and AK Steel to evaluate whether the combined company would be negatively impacted by a ratings downgrade. Mr. Goncalves also provided the Cliffs board with an overview of the status of the proposed transaction, expected timing and the proposed financing structure as well as an update regarding his conversations with Mr. Newport and Mr. Michael, including the AK Steel board’s desire for an offer that would result in AK Steel stockholders having pro forma ownership in the combined company in the mid-30 percent range. The Cliffs board concluded the discussion by considering next steps and upcoming milestones with respect to the potential transaction. Separately, after completing the discussion on the potential transaction, the

 

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Cliffs board reviewed and discussed Cliffs’ five-year business plan. Following discussion, the Cliffs board unanimously approved Cliffs’ five-year business plan.

During the morning of November 15, 2019, the AK Steel board held a special telephonic meeting, with members of AK Steel management and representatives of Goldman Sachs and Weil in attendance. During the meeting, members of AK Steel management provided the AK Steel board with an update on the status of the potential transaction, including AK Steel’s due diligence efforts, and reviewed perspectives regarding the strategic rationale for the transaction and potential initial synergy opportunities that had been identified. AK Steel management also reviewed with the AK Steel board certain historical financial information concerning Cliffs as well as certain pro forma capital structure considerations with respect to the potential transaction. Representatives of Goldman Sachs then reviewed with the AK Steel board certain historical financial information concerning Cliffs as well as certain historical developments with respect to Cliffs’ business. The representatives of Goldman Sachs also discussed their preliminary analyses regarding Cliffs’ cost structure, including an overview of Cliffs’ and AK Steel’s respective performance relative to certain parties in the steel and iron ore markets, and provided an update on Cliffs’ and AK Steel’s respective trading multiples and the related impact on the potential exchange ratio for the transaction. At the conclusion of the meeting, the AK Steel board directed that Messrs. Newport and Michael should continue to negotiate the potential terms of the transaction with Mr. Goncalves, reiterating that the AK Steel board continued to desire that AK Steel stockholders have a greater pro forma ownership percentage of the combined company and to discuss including a cash component as part of its proposed consideration.

Following the respective telephonic meetings of the Cliffs and AK Steel boards earlier that day, on November 15, 2019, Messrs. Newport, Michael and Goncalves held a teleconference call to further discuss the potential transaction, including potential opportunities to create shareholder value, views regarding the potential synergies and financial sensitivity analyses, and the potential form and amount of consideration for the transaction. During this discussion, Mr. Michael reiterated AK Steel’s request (previously made by Mr. Newport to Mr. Goncalves on October 30) that the consideration in the merger consist of a combination of cash and equity, and Mr. Goncalves indicated that he did not believe that the Cliffs board would support the payment of any cash consideration.

On November 16, 2019, Jones Day, on behalf of Cliffs, sent an initial draft of the Merger Agreement for the proposed transaction to Weil. From November 16, 2019 until the execution of the Merger Agreement on December 2, 2019, the parties and their respective legal advisors exchanged numerous drafts, and engaged in numerous discussions and negotiations concerning the terms of the Merger Agreement and the related ancillary documents. During the course of these negotiations, significant areas of discussion and negotiation involved the amount and form of the merger consideration, including whether the consideration would be all-stock, the scope and degree of reciprocity of the representations, warranties and covenants, including the interim operating restrictions and the “no shop” provisions, the tax opinion-related closing condition, the level of commitment required from Cliffs in order to obtain regulatory approvals, the circumstances under which the board of directors of each party could change its recommendation in favor of the transaction, the circumstances under which the board of directors of each party would be permitted to terminate the Merger Agreement, including whether the parties would be permitted to terminate the agreement following its receipt of a superior proposal, and the amount of the termination-related fees payable in connection therewith.

Mr. Goncalves and Mr. Newport met in person on November 20, 2019 and spoke via telephone on each of November 20 and November 21, 2019 to discuss the status of the potential transaction, including the potential exchange ratio and the progress of the parties’ respective due diligence and synergy reviews and financial sensitivities analysis. During the in-person meeting on November 20, 2019, Mr. Goncalves indicated to Mr. Newport that it was his view that Cliffs’ financial analysis may be able to support an exchange ratio that would result in AK Steel stockholders, in their capacity as such, owning a greater percentage of the combined company than had been initially proposed in the October 21 proposal, but that he would need to discuss the analysis further with the Cliffs board.

 

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During a follow-up call on the morning of November 22, 2019, Messrs. Newport and Goncalves discussed the AK Steel board’s desire to include a cash component in the consideration or a collar on the exchange ratio as well as the anticipated timing for Cliffs’ delivery of a revised proposal to acquire AK Steel.

During the afternoon of November 22, 2019, the AK Steel board held a special telephonic board meeting, attended by representatives of Weil and Goldman Sachs, to discuss the potential transaction. Mr. Newport and other members of AK Steel management provided the AK Steel board with an update on the status of negotiations as well as the progress and results of their due diligence review and the joint work being undertaken with Cliffs and its financial advisors to identify and validate synergies. Representatives of Goldman Sachs then discussed with the AK Steel board its preliminary financial analyses. Representatives of Goldman Sachs also reviewed with the AK Steel board certain considerations with respect to the form of consideration and exchange ratio and AK Steel’s capital structure and discussed with the AK Steel board their view that there were unlikely to be other strategic partners that AK Steel had not had prior discussions with who, at the time, would be interested in entering into a potential transaction with AK Steel that would result in AK Steel stockholders receiving greater consideration than could be received in a transaction with Cliffs. Representatives of Weil provided the AK Steel board with a written review of the board’s fiduciary duties and also reviewed with the AK Steel board a summary of the proposed structure for the transaction and certain key terms that were under discussion in connection with the draft Merger Agreement, including proposed terms relating to the composition of the combined company’s board, the treatment of AK Steel’s existing indebtedness and the delivery by Cliffs of certain financing commitments, Cliffs’ regulatory undertaking and the circumstances in which the AK Steel board would be permitted to change its recommendation in favor of the transaction or terminate the Merger Agreement. Members of AK Steel management then again reviewed with the AK Steel board the strategic rationale for the potential transaction and their views regarding the potential strategic alternatives available to AK Steel and the potential for each to create significant value for AK Steel stockholders. Following the discussion, the AK Steel board directed AK Steel management to continue to negotiate the potential terms of the transaction, and instructed AK Steel management that the board was focused on the need for AK Steel stockholders to have a greater pro forma ownership percentage of the combined company.

On November 22, 2019, the Cliffs board held a telephonic meeting, with members of Cliffs management and representatives of Jones Day in attendance. The Cliffs management team provided an update on the proposed transaction. The Cliffs management team indicated that due diligence continued to progress well and Cliffs was continuing to find additional opportunities for potential synergies. Mr. Goncalves indicated that he and Mr. Newport continued to negotiate the pro forma ownership of AK Steel stockholders after the closing of the potential transaction. The Cliffs board asked additional questions about the potential synergies, pension liabilities of AK Steel, and change of control payments and retirement benefits that would be expected to be funded at the closing of the potential acquisition, all of which the Cliffs management team addressed. The Cliffs management team then addressed questions on the meetings with the rating agencies. The Cliffs board then considered next steps, including Mr. Goncalves continuing discussions with AK Steel, and upcoming milestones with respect to the potential transaction.

During the evening of November 22, 2019, Messrs. Newport, Goncalves and Michael spoke to discuss the feedback received at their respective board meetings as well as next steps for continuing to progress the potential transaction. During the discussion, Mr. Michael told Mr. Goncalves that the AK Steel board continued to be focused on the need for AK Steel stockholders to have a greater pro forma ownership interest in the combined company than what had been proposed by Cliffs.

On November 24, 2019, Messrs. Goncalves and Newport spoke to discuss the potential transaction, including the parties’ progress in analyzing the potential cost synergies that could result from the transaction, certain diligence matters and the parties’ respective views regarding the form and amount of the consideration to be received by AK Steel stockholders, including whether the exchange ratio for the potential transaction should be fixed and Cliffs’ continued view that the consideration should consist entirely of Cliffs’ equity securities.

 

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