Mergers and collaborations are part of life in business, and are sometimes vital for efficiency, sustenance and profitability. Here are two agreements made recently in two different segments of industry. People having gained experience by trading stocks online would know that these affect the share value enough to keep a watch out for.
Cliffs to Supply More Iron Ore Pellets to ArcelorMittal
Cliffs Natural Resources Inc has entered into a long term commercial agreement with ArcelorMittal USA LLC for supplying iron ore pellets tailor-made for the coming ten years all the way through 2026. This is indeed a new contract which sets up a minimum pellets tonnage of 7 million long tons. The two previous contracts had a combined minimum level lesser than what is attained from the new contract.
Those earlier contracts expire in December 2016 and January 2017. These will be replaced by the new commercial agreement that will satisfy the entire pellet purchase requirements of ArcelorMittal from those previous contracts.
The new agreement takes ArcelorMittal’s total iron ore pellets purchases from Cliffs to 10 million long tons. This will retain the current position held by Cliffs as ArcelorMittal USA’s only outside pellets supplier. Cliffs believes it expects an improvement in overall iron ore-realized revenues per ton from the US in 2017, when compared to its present guidance for 2016.
Anheuser-Busch InBev to Sell Starbucks’ Tea
Meanwhile, Anheuser-Busch InBev NV and Starbucks Corp. have reached an agreement for the former to manufacture as well as bottle and distribute a line of the latter’s Teavana brand ready-to-drink tea. These are the United States’ biggest manufacturers of beer and coffee. It’s worth pointing out that ready-to-drink tea is one of America’s fastest growing beverage categories, and its consumption rose in 2015 by 6.1% according to the Beverage Marketing Corp.
AB InBev, that has been experiencing falling beer volumes in the US, can now provide its over 500 distributors with something else to sell. Starbucks bought Teavana Holdings Inc. for $260 million in 2012, which has been its largest ever acquisition. Starbucks had said that it would provide a Starbucks-worth experience to Teavana, which usually sold tea in loose-form. As a result, Starbucks has managed to sell over $1 billion worth Teavana handcrafted tea beverages in 2015. This has resulted in an 11% increase in year-over-year sales.
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