AK Steel — Merger or Acquisition (December 2019)
24 slides from AK Steel's merger presentation, Dec 3, 2019
Slide 1: Cleveland-Cliffs to Acquire AK Steel
Cleveland-Cliffs to Acquire AK Steel DECEMBER 3, 2019 Exhibit 99.2
Slide 2: Forward-looking Statements
Forward-looking Statements This presentation contains statements that constitute "forward-looking statements" within the meaning of the federal securities laws. As a general matter, forward-looking statements relate to anticipated trends and expectations rather than historical matters. Forward-looki
Slide 3: Additional Statements
Additional Statements Participants in the Solicitation AKS, CLF and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding AKS’ directors and executive officers, includ
Slide 4: Today's Presenters
Today’s Presenters Keith Koci Executive Vice President and CFO Lourenco Goncalves Chairman of the Board, President and CEO Roger Newport CEO and Director 3
Slide 5: Overview of Cleveland-Cliffs' Acquisition of AK Steel
Overview of Cleveland-Cliffs’ Acquisition of AK Steel Enterprise value defined as equity market value + total debt - cash. AK Steel debt and cash balances as of 9/30/2019 of $2,001m and $31m, respectively. AK Steel LTM 09/30/19 Adjusted EBITDA of $535m. AK Steel shares will be delisted upon transact
Slide 6: Creates Vertically Integrated Producer of Value-added Iron Ore and Steel
Creates Vertically Integrated Producer of Value-added Iron Ore and Steel Source:Cleveland-Cliffs and AK Steel filings. Note: Revenues, Adjusted EBITDA, FCF and synergy figures are approximate figures. PF LTM revenues exclude intercompany sales, which are calculated based on 25% of revenue, per Cleve
Slide 7: Transaction rationale and industrial logic is compelling
Transaction rationale and industrial logic is compelling Combines AK Steel’s high quality steel assets with a reliable supply of high quality iron ore pellets Generates more predictable earnings and cash flow due to focus on value-added and non-commoditized products and less exposure to volatile com
Slide 8: Robust Pro-forma Financial Profile
Robust Pro-forma Financial Profile Cleveland-Cliffs standalone PF Cleveland-Cliffs +281% Revenue ($m)(1) +109% Adjusted EBITDA ($m)(2) -0.2x Total Debt / Adj. EBITDA(4) +103% FCF ($m)(3) Dramatically improved scale and earnings diversification Strong FCF profile positions PF company well through cyc
Slide 9: Transaction Creates Leading EBITDA Margins in North American Steel Industry
Transaction Creates Leading EBITDA Margins in North American Steel Industry Cleveland-Cliffs currently generates a margin of approximately $30-$40/short ton for every pellet produced and sold to AK Steel That margin differential is a lever available to the PF company that is not available to AK Stee
Slide 10: AK Steel has Best-in-class Position in Non-commoditized Steel
AK Steel has Best-in-class Position in Non-commoditized Steel AK Steel’s 2018A sales by end-market One of the few steel producers capable of producing the carbon and stainless steel grades critical to automotive lightweighting trends Technology leader in Advanced High Strength Steels (“AHSS”) and Ul
Slide 11: Steel Demand in Automotive Sector Projected to Remain Strong
Steel Demand in Automotive Sector Projected to Remain Strong North America light vehicle production Growing demand for ultra high-strength steels (UHSS) (millions of units) (net pounds per vehicle) Stable and consistent automotive production growth expected over the next decade Growing demand for li
Slide 12: Significantly De-risks Cleveland-Cliffs' Future Pellet Offtake
Significantly De-risks Cleveland-Cliffs’ Future Pellet Offtake Illustrative shipment breakdown (current) ~20mt of pellets Pro Forma – sample pellet demand breakdown ~5% intercompany sales Up to ~60% of intercompany sales AK Steel: ~6mt Contracted through 2020/2024: 4-5mt HBI Run-Rate: ~3mt Additiona
Slide 13: Provides compelling opportunity for further EAF-oriented growth
Provides compelling opportunity for further EAF-oriented growth Provides further expansion into attractive EAF market dynamics Turns Ashland from a negative to a positive Potentially provides a compelling, low-capex, high-return opportunity to be a significant merchant pig iron supplier in the Great
Slide 14: Delivers Significant Synergy Potential
Delivers Significant Synergy Potential Approximately $120 million in annual cost synergies estimated, including approximately $40 million in annual public company-related cost savings alone Using an assumed Cliffs multiple of 7.0x, value of synergies represents ~26% of combined market cap of the two
Slide 15: Cleveland-Cliffs has Ample Financial Capacity to Address AK Steel's Near-term Maturities
Cleveland-Cliffs has Ample Financial Capacity to Address AK Steel’s Near-term Maturities WACD: ~5.1% Cleveland-Cliffs’ Existing Debt Maturity Profile AK Steel’s Existing Debt Maturity Profile WACD: ~7.2%(1) Callable at par (2) 4-year window Source:Cleveland-Cliffs and AK Steel filings. (1)Weighted a
Slide 16: Strong and Sustainable Pro Forma Balance Sheet
Strong and Sustainable Pro Forma Balance Sheet 4-year window Source: Cleveland-Cliffs and AK Steel filings. Note:Cleveland-Cliffs will offer to exchange AK Steel’s 2025 and 2027 unsecured notes into Cleveland-Cliffs notes with the same economic terms and maturity. (1)Illustrative maturity date. 15
Slide 17: Financing Strategy in Place to Address AK Steel Balance Sheet
Financing Strategy in Place to Address AK Steel Balance Sheet Cleveland-Cliffs’ $450 million ABL and AK Steel’s $1.5 billion ABL to be replaced by a new $2.0 billion facility(1) ABL AK Steel 2023 Secured Notes To be refinanced as part of the transaction with lower cost secured notes AK Steel 2021 No
Slide 18: The New Cleveland-Cliffs
The New Cleveland-Cliffs Best-in-class, high-value added iron ore & steel producer in North America with industry leading margins Exceptionally well-positioned to generate value for diverse customer base across both BF and EAF businesses De-risks up to 9 million long tons of pellets (approximately 4
Slide 19: The New Cleveland-Cliffs
The New Cleveland-Cliffs MN ON AL KY OH PA MI MI IN Windsor, Tillsonburg & Otterville, ON, Canada Tilden Mine Ashland (Potential Pig Iron Plant) Butler, PA Middletown, OH Mansfield, OH Walbridge, OH Cleveland- Cliffs Headquarters (Cleveland, OH) Sylacauga, AL Bowling Green, KY Hibbing Taconite Mine
Slide 20: Timeline to Close
Timeline to Close Expect to close transaction (1H 2020) Prepare and file documents with the SEC Cleveland-Cliffs stockholders vote to approve transaction AK Steel stockholders vote to approve transaction Receive regulatory approvals SEC reviews and gives comments; proxies printed and mailed Transact
Slide 21: Slide 21
Slide 22: Creating a Vertically Integrated Producer of Value-added Iron Ore and Steel Products
Creating a Vertically Integrated Producer of Value-added Iron Ore and Steel Products © 2019 Cleveland-Cliffs Inc. All Rights Reserved. COMPELLING STRATEGIC FIT AND MEANINGFUL FINANCIAL BENEFITS Combines high-quality steel assets with reliable supply of iron ore pellets, creating best-in-class vertic
Slide 23: Notes on pro forma metrics
Note: Cleveland-Cliffs PF metrics calculated after adjusting AK Steel’s standalone metrics for iron ore cost savings from purchasing directly from Cleveland-Cliffs. Metrics include Cliff’s third party pellet sales and utilizes each companies’ respective methodologies of calculating Adj. EBITDA. Base
Slide 24: Cautionary Statement Regarding Forward-Looking Information
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION This communication contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
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