ThyssenKrupp AG (TKA), the German steelmaker seeking to divest its Americas unit, fell the most on the DAX index after two people briefed on its plans said it may hold on to its plant in Brazil and sell only the U.S. operation.
ThyssenKrupp dropped as much as 1.5 percent and traded down 1.1 percent at 16.675 euros as of 11:01 a.m. in Frankfurt. The benchmark DAX rose 1.1 percent.
Bids for the Brazilian mill were too low and the company has accepted the Americas unit won’t fetch its 3.4 billion-euro ($4.5 billion) book value and faces a writedown, one person said late last week, asking not to be named as the talks are private. A deal to sell the U.S. mill would require some of the Brazilian plant’s output be processed at the Alabama site, the other said.
“There’s not the slightest chance of operating the plant in Brazil profitably,” Ingo Schmidt, an analyst at Hamburger Sparkasse AG, said today. He expects a writedown and a capital increase this month so that auditors can certify the annual balance sheet. “A bigger capital increase will follow. In total 5 billion euros are necessary. I consider a further disposal of silverware possible, for example the elevator unit.”
ThyssenKrupp, Germany’s largest steelmaker, is seeking to offload the Americas unit and expand non-steel operations to weather a drop in demand. Lower consumption in the auto and construction industries and higher competition from China has reduced steel prices, leading German peer Salzgitter AG (SZG) to announce 1,500 job cuts last month.
Brazil’s Cia. Siderurgica Nacional SA (CSNA3) would probably be the buyer of the U.S. plant, which may fetch about $1.5 billion, one of the people said. People with knowledge of the talks said in May that CSN was the leading bidder for the Steel Americas unit.
ThyssenKrupp is in “advanced negotiations with a leading bidder on the sale,” Stefan Ettwig, a spokesman, said Sept. 13 by telephone from Essen, where the company is based. “The group is also in talks with other interested parties.” He declined to comment on the possibility of keeping the Brazilian mill.
Focus Magazine reported yesterday that ThyssenKrupp plans to issue a bond paying interest of 8 percent.
The company “has to pay high interest for the hybrid bond,” Hamburger Sparkasse’s Schmidt said by phone from Hamburg. The rate is “however, historically low for a company with similar accounting ratios.”
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