May 19, 2020 / 9:25 AM / 8 days ago

'Nothing off-limits': Thyssenkrupp could sell steel business in historic shift

FRANKFURT/DUESSELDORF (Reuters) - Thyssenkrupp (TKAG.DE) could sell most of its steelmaking division, its CEO said on Tuesday, marking a historic reversal in strategy for the German conglomerate which has built its 200-year-old legacy as an industrial champion on the business.

FILE PHOTO: Martina Merz, CEO of German conglomerate Thyssenkrupp AG, gestures during the annual shareholders meeting in Bochum, Germany, January 31, 2020. REUTERS/Wolfgang Rattay/File Photo

“Nothing is off-limits anymore,” Martina Merz said when asked by Reuters if Thyssenkrupp could a sell a majority stake in the steel business. She warned, however, that any disposals would be difficult to pull off in the current environment.

“M&A markets are almost dead,” she said.

Merz was speaking hours after announcing that the group was in talks with steel industry peers about consolidation options. She said the coronavirus pandemic was opening up new possibilities for cooperation.

“We are drawing on the full range of options,” she said. “That means all forms of consolidation are being looked at, including mergers, takeovers, us acquiring peers, and us developing the unit independently.”

The fact that the steel division is no longer deemed an essential part of Thyssenkrupp represents a fundamental shift for a company that started off life in 1811 when Friedrich Krupp set up a factory to make cast steel.

The steel business, the second-biggest in Europe by sales, is reeling from weakening demand, cheap Chinese imports and a botched attempt to merge it with the European division of Tata Steel (TISC.NS), a deal blocked on antitrust concerns.

Shares in Thyssenkrupp have lost nearly two-thirds of their value over the past 12 months after a raft of profit warnings.

The announcement accelerates Thyssenkrupp’s dismantling, a process that started last year when the group decided to sell its crown jewel: its elevators unit. Some investors say the vast conglomerate, which makes everything from car parts to submarines, should be broken up to maximise value.

Thyssenkrupp shares were up 2.3% at 1400 GMT.

FACTBOX on Thyssenkrupp’s new structure

Sources previously told Reuters that contact between Thyssenkrupp and Tata Steel never broke off and that both were still in talks about consolidation.

Thyssenkrupp is also in discussions with Sweden’s SSAB (SSABa.ST) and China’s Baoshan Iron & Steel (600019.SS), sources familiar with the matter said.

Baosteel declined to comment as did SSAB. Tata Steel Europe had no immediate comment.

Germany’s powerful union IG Metall said any consolidation move would have to safeguard jobs, warning it would not accept additional job cuts at Thyssenkrupp.

The steelmaking business accounts for more than a fifth of Thyssenkrupp’s sales, making it the company’s second-biggest unit after material services.

Additional reporting by Arno Schuetze; Editing by Michelle Martin and Pravin Char

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