Cleveland-Cliffs Inc. agreed to buy AK Steel Holding Corp . in a $1.1 billion stock swap that adds steel products to one of the largest producers of iron-ore pellets.

Cleveland-Cliffs said Tuesday that it would swap 0.4 shares, worth about $3.36 based on Monday’s closing price of $8.41, for each share of AK Steel.

The deal represents a roughly 16% premium to Monday’s closing price of $2.89 for AK Steel, a West Chester, Ohio, producer of flat-rolled carbon, stainless and electrical steel products.

The iron-ore miner said its shareholders will own about 68% of the combined company, while AK Steel shareholders will have about 32%. Lourenco Goncalves, chairman and chief executive of Cleveland-Cliffs, will lead the combined company.

Cleveland-Cliffs said it is considering reopening AK Steel’s closed blast furnace in Ashland, Ky. Cleveland-Cliffs would melt its iron ore in the furnace and then sell the iron to steelmakers that make steel by melting scrap steel or iron in electric furnaces.