Fortune 500 company to establish HQ in downtown Cleveland

Corporate headquarters of Cleve-
land-Cliffs Inc. is in 200 Public
Square in downtown Cleveland.
It is viewed from the west side
of Public Square where survey
wells were recently drilled for
Sherwin-Williams proposed new
headquarters facilities (KJP).
CLICK IMAGES TO ENLARGE

**UPDATED Dec. 7, 2019**

In case you missed the major-league news, and if you rely on Cleveland local news media you probably did, but another Fortune 500 company will establish its corporate headquarters in downtown Cleveland.

Today, Cleveland-Cliffs Inc. announced it will be acquiring AK Steel Holding Corp. for $1.1 billion in an all-stock deal. In terms of revenues, the minnow just swallowed the whale. Cliffs generated about $2.12 billion in net revenue in 2018 whereas AK generated $6.08 billion.

At total net revenues of $8.2 billion in 2018, the combined company would have ranked as the 350th-largest company in the United States. Among Northeast Ohio firms, that would put the combined company between No. 256 Parker-Hannifin and No. 383 J.M. Smucker.

AK Steel, founded in 1899 in Middletown, OH, ranks at No. 461 on the Fortune 500 list. Cliffs, founded in 1847 in Cleveland, slipped out of the Fortune 500 in 2015.

The two firms considered their combination would be complementary across mining, pelletizing and innovative manufacturing to create a vertically integrated producer of value-added iron ore and steel products.

Cliffs is a highly profitable mining company whereas AK Steel is a low-profit steel manufacturer. Combined, the Cliffs-AK expects to save about $120 million in the first year after the acquisition is completed..

The firms said that the savings would come primarily from consolidating corporate functions, reducing duplicative overhead costs, and procurement and energy cost savings, as well as operational and supply chain efficiencies, according to a written statement.

"AK Steel will become a direct, wholly-owned subsidiary of Cliffs and will retain its branding and corporate identity. Cliffs will continue to be listed on the NYSE (New York Stock Exchange) with its HQ in Cleveland, while maintaining a significant presence at AK Steel’s current offices in West Chester, Ohio along with its Research and Innovation Center in Middletown," the statement said.

Cleveland-Cliffs has a prominent presence in the downtown
skyline, but not in the usual manner. It's name adorns the side
of the Steamship William G. Mather Museum docked at North
Coast Harbor, part of the Great Lakes Science Center (KJP).

Cliffs' HQ is located at 200 Public Square, the city's third-tallest skyscraper at 46 stories and 659 feet. Built as the Standard Oil of Ohio (Sohio) HQ in 1985, an ownership group led by New York-based DRA Advisors acquired the 1.27-million-square-foot building in 2018 for $187 million. Local developer-investor Scott Wolstein has an ownership stake in the building.

Cliffs' HQ, as well as Cliffs Natural Resources Inc., leases about 200,000 square feet in 200 Public Square, which is 86 percent leased according to Jones Lang LaSalle's 2019 Cleveland Skyline market report.

Only three floors -- four, 10 and 13 -- in 200 Public Square are entirely or almost entirely available (ie: not leased). Few if any of the floors near where Cliffs is located (upper-20s to mid-30s) have any leasable space available.

While Cliffs' actual HQ staffing data is not available, it is possible to estimate its staffing. At an average of 150-200 square feet per employee, Cliffs may have as many as 1,000 to 1,300 employees in its HQ. Or at least it used to before it made cutbacks in HQ staffing the mid-2010s. Sources say that two of the floors that Cliffs leases at 200 Public Square are empty.

Similarly, detailed data on AK Steel's HQ employment is unavailable. However, the company has about 2,400 employees in Butler County of which 1,730 are hourly workers at the AK Steel's Middletown Works steel complex. That may leave up to 700 employees at AK Steel's HQ in West Chester, which is also in Butler County.

Obviously, many of those aren't coming to the Cleveland HQ either because they will be downsized or are needed for local management of the Middletown Works. But it is possible that dozens or perhaps even hundreds of corporate staff may be relocated to Cleveland.

Regardless of the number, it appears to be a big win for Cleveland. Anytime you add a new Fortune 500 company HQ, or even a Fortune 1000 company, or any growing company for that matter, it's a win for Cleveland's economy.

If only our local media paid as much attention to the employment wins as it does to the losses, or even the hollow threat of a potential loss, we might realize the jobs growth that is occurring here.

END