Quarterly report pursuant to Section 13 or 15(d)

ACQUISITIONS (Tables)

v3.21.2
ACQUISITIONS (Tables)
 9 Months Ended
Sep. 30, 2021
Business Combinations [Abstract]  
Schedule of Business Acquisitions by Acquisition, by Acquisition
The fair value of the total purchase consideration was determined as follows:
(In Millions)
Fair value of Cliffs common shares issued $ 990 
Fair value of Series B Participating Redeemable Preferred Stock issued 738 
Fair value of settlement of a pre-existing relationship 237 
Cash consideration 639 
Total purchase consideration $ 2,604 
The fair value of Cliffs common shares issued was calculated as follows:
Number of Cliffs common shares issued 78,186,671
Closing price of Cliffs common share as of December 9, 2020 $ 12.66 
Fair value of Cliffs common shares issued (in millions) $ 990 
The fair value of Cliffs Series B Participating Redeemable Preferred Stock issued was calculated as follows:
Number of Cliffs Series B Participating Redeemable Preferred Stock issued 583,273 
Redemption price per share as of December 9, 2020 $ 1,266 
Fair value of Cliffs Series B Participating Redeemable Preferred Stock issued (in millions) $ 738 
The fair value of the estimated cash consideration was comprised of the following:
(In Millions)
Cash consideration pursuant to the AM USA Transaction Agreement $ 505 
Cash consideration for purchase of the remaining JV partner's interest of Kote and Tek 182 
Total cash consideration receivable (48)
Total cash consideration $ 639 
The cash portion of the purchase price was subject to customary working capital adjustments, and the working capital adjustments were finalized during the second quarter of 2021. We made certain elections under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, which did not change the final cash consideration.
The fair value of the settlement of a pre-existing relationship was comprised of the following:
(In Millions)
Accounts receivable $ 97 
Freestanding derivative asset from customer supply agreement 140 
Total fair value of settlement of a pre-existing relationship $ 237 
The fair value of the total purchase consideration was determined as follows:
(In Millions)
Fair value of AK Steel debt $ 914 
Fair value of Cliffs common shares issued for AK Steel outstanding common stock1
618 
Other1
3 
Total purchase consideration $ 1,535 
1 Included as non-cash investing activities in the Statement of Unaudited Condensed Consolidated Cash Flows for the nine months ended September 30, 2020.
The fair value of AK Steel's debt included in the consideration was calculated as follows:
(In Millions)
Credit Facility $ 590 
7.500% Senior Secured Notes due July 2023
 324 
Fair value of debt included in consideration $ 914 
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed
The preliminary purchase price allocation to assets acquired and liabilities assumed in the AM USA Transaction was:
(In Millions)
Initial Allocation of Consideration Measurement Period Adjustments Updated Allocation
Cash and cash equivalents $ 35  $ —  $ 35 
Accounts receivable, net 349  (5) 344 
Inventories 2,115  14  2,129 
Other current assets 34  (1) 33 
Property, plant and equipment 4,017  372  4,389 
Other non-current assets 158  7  165 
Accounts payable (758) 27  (731)
Accrued employment costs (271) 4  (267)
Pension and OPEB liabilities, current (109) —  (109)
Other current liabilities (398) (8) (406)
Pension and OPEB liabilities, non-current (3,195) —  (3,195)
Other non-current liabilities (598) (81) (679)
Noncontrolling interest (13) 13  — 
Net identifiable assets acquired 1,366  342  1,708 
Goodwill 1,230  (334) 896 
Total net assets acquired $ 2,596  $ 8  $ 2,604 
The following is a summary of the purchase price allocation to assets acquired and liabilities assumed in the AK Steel Merger:
(In Millions)
Initial Allocation of Consideration Measurement Period Adjustments Final Allocation of Consideration as of March 31, 2021
Cash and cash equivalents $ 38  $ 1  $ 39 
Accounts receivable, net 666  (2) 664 
Inventories 1,563  (243) 1,320 
Other current assets 68  (16) 52 
Property, plant and equipment 2,184  90  2,274 
Deferred income taxes —  69  69 
Other non-current assets 475  (4) 471 
Accounts payable (636) (8) (644)
Accrued employment costs (94) 1  (93)
Pension and OPEB liabilities, current (75) (3) (78)
Other current liabilities (236) 9  (227)
Long-term debt (1,179) —  (1,179)
Pension and OPEB liabilities, non-current (873) 2  (871)
Other non-current liabilities (507) 72  (435)
Noncontrolling interest —  (1) (1)
Net identifiable assets acquired 1,394  (33) 1,361 
Goodwill 141  33  174 
Total net assets acquired $ 1,535  $ —  $ 1,535 
Schedule of Business Acquisitions by Acquisition, Equity Interest Issued or Issuable
The fair value of Cliffs common shares issued for outstanding shares of AK Steel common stock and with respect to Cliffs common shares underlying converted AK Steel equity awards that vested upon completion of the AK Steel Merger was calculated as follows:
(In Millions, Except Per Share Amounts)
Number of shares of AK Steel common stock issued and outstanding 317 
Exchange ratio 0.400 
Number of Cliffs common shares issued to AK Steel stockholders 127 
Price per share of Cliffs common shares $ 4.87 
Fair value of Cliffs common shares issued for AK Steel outstanding common stock $ 618 
Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination
The purchase price allocated to identifiable intangible assets and liabilities acquired was:
(In Millions) Weighted Average Life (In Years)
Intangible assets:
Customer relationships $ 77  18
Developed technology 60  17
Trade names and trademarks 11  10
Total identifiable intangible assets $ 148  17
Intangible liabilities:
Above-market supply contracts $ (71) 12
Business Acquisition, Pro Forma Information
The following table provides unaudited pro forma financial information, prepared in accordance with Topic 805, for the three and nine months ended September 30, 2020, as if AK Steel had been acquired as of January 1, 2019:
(In Millions)
Three Months Ended
September 30, 2020		 Nine Months Ended
September 30, 2020
Revenues $ 1,646  $ 4,265 
Net loss attributable to Cliffs shareholders (6) (124)