KRUPP Hoesch, the German steel and engineering group, last night unexpectedly dropped its bid for its larger rival Thyssen and agreed instead to press ahead with talks to form a joint steel company.
In a statement, signed by the two companies chief executives and Mr Wolfgang Clement, the economics minister of North Rhine Westphalia, Krupp pledged not to make any future bid for Thyssen.
The two companies, which have overlapping interests in distribution and auto parts manufacture, as well as a joint stainless steel subsidiary, said they would study the possibility of co operation in areas other than steel.
In the meantime, they said the talks on merging their carbon steel interests were "progressing well" and that the planned joint company would enhance Germany's viability as a base for steelmaking.
The future joint steel company will provide Mr Gerhard Cromme, Krupp's chief executive, with about 75 per cent of the synergies worth an estimated one billion deutschmarks (£377 million) a year he hoped to realise by the full bid for Thyssen. But Mrs Dieter Vogel, Thyssen chief executive has said his company will be the dominant partner because it is the larger.
The two paragraph statement marked the end of a highly unusual and dramatic offer which valued Thyssen at 13.6 billion deutschmarks (£4.9 billion) and caused widespread concern that Anglo Saxon style hostile bids might become part of the German financial scene.
The proposed bid prompted a political storm, with politicians across the spectrum condemning it as it would cost jobs. Workers also reacted strongly to the bid.
About 1,000 steelworkers demonstrated outside the Deutsche Bank in Dusseldorf yesterday and more than 30,000 Thyssen workers are expected to demonstrate in Frankfurt today at the headquarters of Deutsche Bank, which advised Krupp alongside Dresdner Bank and Goldman Sachs of the US. The speed of last night's announcement came as a surprise because Krupp had set the Thursday deadline to establish whether a joint steel company would be, feasible.
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