Outokumpu’s Terni Plant Sale Interests Steelmakers Group

Outokumpu Oyj drew interest from a group of three steelmakers for a plant at Terni in Italy that the Finnish company needs to divest to satisfy regulators.

Aperam SA, Ilta Inox SpA and Marcegaglia SpA signed a memorandum of understanding to set up a venture to buy Terni, the companies said today in a statement. Luxembourg-based Aperam would be the majority shareholder and operator. Outokumpu shares rose as much as 5.7 percent in Helsinki.

“There are several buyer candidates at this stage of the process, of which Aperam’s consortium is one,” Saara Tahvanainen, a spokeswoman for Outokumpu, said by phone. She declined to comment on other potential bidders or the purchase price. The sale is proceeding to schedule and expected to close in the second quarter, Tahvanainen said.

In December, Outokumpu completed its 2.7 billion-euro ($3.6 billion) purchase of ThyssenKrupp AG’s Inoxum stainless-steel unit. To remedy European Commission concerns that the deal might allow the companies to raise prices of cold-rolled steel products, Outokumpu agreed to divest the Terni mill.

“Looking at Outokumpu’s balance sheet, the most important thing for them is to get the best possible price,” said Mikael Doepel, an analyst at Svenska Handelsbanken AB in Helsinki. “As this is a forced sale it undoubtedly has an impact on the price. My assumption is that the price will be below the book value.”

Asset Value

The balance-sheet value of the assets for sale, including the Terni mill and a service center in Willich, Germany, is 539 million euros, according to Outokumpu.

Aperam has shown interest in Terni before, with Chief Executive Officer Philippe Darmayan saying in October that the company was “watching the situation very carefully.” Chief Financial Officer Julien Onillon said Feb. 4 that Aperam would “talk with the European Commission and the commissions who will review that if we can bid or not bid.”

Should regulators approve an Aperam offer, Outokumpu may view a sale to an established European steel producer as “preferable,” rather than increasing the number of rivals by selling to a company from outside the region, according to Handelsbanken’s Doepel.

Purchase Allowance

“When the European Commission demanded the sale, surely one of the thoughts was that it would be sold to an outside party,” Doepel said. “Now that Aperam is making these moves we could presume that it indicates they’d be allowed to buy.”

Selling Inoxum is part of ThyssenKrupp’s strategy to cut its reliance on steel and expand other operations as waning auto and construction industry demand for the material reduces its profit margins.

“In practice all interest in Terni is positive for Outokumpu,” Juha Kinnunen and Sauli Saumala, analysts at Inderes Oy, said in a note today.

Outokumpu climbed 4.4 percent to 73 euro cents at 1:36 p.m. in Helsinki. Trading volumes neared 6 million shares, exceeding the three-month daily average. Aperam advanced 2.9 percent to 11.175 euros in Amsterdam.

“It’s positive that Aperam are serious enough about bidding to be forming this consortium,” Neil Sampat, an analyst at Nomura Holdings Inc. in London, said by phone.“They are probably one of the leading candidates here.”

To contact the reporters on this story: Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net; Kasper Viita in Helsinki at kviita1@bloomberg.net

To contact the editors responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net; Christian Wienberg at cwienberg@bloomberg.net

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