ThyssenKrupp in talks with Finnish rival

GERMANY’S THYSSENKRUPP and Finland’s Outokumpu are in early talks over a stainless steel tie-up, moving towards the long-awaited consolidation of a sector that has struggled to battle overcapacity and cheap Chinese imports.

ThyssenKrupp, a steelmaking conglomerate whose business stretches from submarines to lifts, is in the throes of a radical restructuring that will see it shed non-core assets with revenues of €10 billion to slash debt.

The sale of all or part of Thyssen’s stainless steel unit, renamed Inoxum, would mark a key step forward in the slimming down of Germanys largest steelmaker – and would also provide welcome good news for its shareholders, still reeling from cost overruns that pushed the company into the red last year.

Outokumpu, itself battling losses, said in a statement yesterday that the two sides were evaluating “potential strategic options, including a potential business combination”. A spokesman for ThyssenKrupp, still officially considering all options for Inoxum, confirmed the company was in talks with its Finnish rival.

A deal to tie up two of Europe’s largest players could be worth as much as €3 billion, creating a producer that could control more than 60 per cent of the European market. Analysts said it was not possible to precisely value a combined stainless entity without more detail on the shape of the potential tie-up, venture or sale, or on likely synergies.

Most said the deal was unlikely to include all Thyssen’s assets.

“I see it as some kind of fusion or joint venture, it is difficult to see that Outokumpu would buy [ThyssenKrupps stainless arm], because the price tag would be around one to two billion euro and Outokumpu does not have means for that,” Pohjola analyst Jari Raisanen said.

Outokumpu, which has fought spiralling losses by selling non-core assets, cutting costs and slashing one in six jobs, has long been seen as a natural partner for Thyssen, given its geographical spread of clients and products.

The stainless steel sector, which produces the metal used for everyday items like cutlery, nuts, bolts and surgical instruments, has been battling competition from Asia and the consequences of a global economic downturn. – Reuters