Thyssen, Outokumpu discuss stainless steel tie-up

Mon Jan 23, 2012 8:00am EST
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By Matthias Inverardi and Terhi Kinnunen

DUESSELDORF, Germany/HELSINKI (Reuters) - Germany's ThyssenKrupp (TKAG.DE: Quote) and Finland's Outokumpu (OUT1V.HE: Quote) 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 euros ($12.7 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 Germany's 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 on Monday 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 euros ($3.9 billion), creating a producer that could control more than 60 percent 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 (ThyssenKrupp's stainless arm), because the price tag would be around one to two billion euros and Outokumpu does not have means for that," Pohjola analyst Jari Raisanen said.   Continued...

<p>A worker of German steelmaker ThyssenKrupp controls a tapping of a blast furnace at Europe's largest steel factory of Germany's industrial conglomerate ThyssenKrupp AG in the western German city of Duisburg March 17, 2010. REUTERS/Ina Fassbender</p>