ThyssenKrupp in Steel Talks With Outokumpu

ThyssenKrupp AG (TKA) rose to its highest level in more than two months as Germany’s largest steelmaker discussed merging its Inoxum stainless unit with Outokumpu Oyj. (OUT1V)

ThyssenKrupp (TKA) gained as much as 3.9 percent to the highest since Nov. 4. in Frankfurt trading, while Outokumpu jumped as much as 17 percent, the most since Feb. 1, 2001, in Helsinki. Options for Inoxum include an initial public offering, spinoff, or sale, Essen-based ThyssenKrupp said in an e-mailed statement.

Finland’s biggest stainless steel company confirmed the talks in a separate statement, saying they included the possibility of a combination of Outokumpu and Inoxum.

“A merger would make perfect sense, especially for Outokumpu, which would get much better access to central Europe’s main markets in Germany and Italy,” Michael Broeker, an analyst at Steubing AG who covers both companies, said by phone from Frankfurt. “As Outokumpu doesn’t have the money for a purchase, they’d need a deal with no cash involved.”

European stainless producers have struggled for years with overcapacity, sliding profit and rising costs, while failing to agree on mergers. Moody’s Investors Service said in August the companies had been unable to value their assets at levels that allowed deals to go ahead. Combinations may also be opposed by European Union antitrust authorities, the ratings company said.

ThyssenKrupp rose 2.2 percent to 21.18 euros by 10:47 a.m. in Frankfurt and Outokumpo surged 11 percent to 7.495 euros, giving it a market value of 1.37 billion euros ($1.77 billion).

Other stainless steel producers advanced. Aperam (APAM), spun off by ArcelorMittal, climbed as much as 11 percent in Amsterdam and Acerinox SA (ACX) jumped as much as 5.7 percent in Madrid.

Shouldering Deal

“I can’t imagine that the Finnish company can shoulder this deal financially,” said Hans-Peter Wodniok at Fairesearch GmbH in Kronberg, Germany, ranked No. 1 by Bloomberg among analysts who cover ThyssenKrupp based on the stock’s one-year return. “Finding a buyer for Inoxum isn’t easy at the moment so ThyssenKrupp may sell for cheap or close to zero but that’s not a helpful strategy as it doesn’t give you new cash.”

ThyssenKrupp on Dec. 2 posted a fiscal full-year loss because of 2.9 billion euros in impairment charges, mainly on project delays and cost overruns at its Steel Americas unit. Inoxum contributed 800 million euros to the writedown, it said.

“Making Inoxum independent is an important step for the strategic development of ThyssenKrupp, to make the company competitive and sustainable for the future,” the German company said. It reiterated an earlier goal of disposing of Inoxum in 12 to 18 months, declining to give more details of its discussions.

ThyssenKrupp will merge Inoxum with Outokumpu and keep a minority stake in the combination, with 18,000 workers and more than 10 billion euros of sales, Rheinische Post said earlier, citing people close to the company that it didn’t identify.

To contact the reporters on this story: Sheenagh Matthews in Frankfurt at smatthews6@bloomberg.net Stefan Nicola in Berlin at snicola2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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