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ThyssenKrupp Advances on Stainless Merger Talks: Frankfurt Mover

An employee inspects steel rolls at a ThyssenKrupp AG steel plant in Duisburg. Photographer: Wolfgang von Brauchitsch/Bloomberg
An employee inspects steel rolls at a ThyssenKrupp AG steel plant in Duisburg. Photographer: Wolfgang von Brauchitsch/Bloomberg

Jan. 23 (Bloomberg) -- ThyssenKrupp AG rose to its highest level in almost three months as Germany’s largest steelmaker discussed merging its Inoxum stainless unit with Outokumpu Oyj.

ThyssenKrupp advanced 2.6 percent to 21.26 euros, the highest since Oct. 28. by the close in Frankfurt, and Outokumpu jumped 18 percent in Helsinki. Options for Inoxum include an initial public offering, spinoff, or sale, Essen-based ThyssenKrupp said in an e-mailed statement.

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

“A combination of Inoxum and Outokumpu would create the European stainless market leader with about 50 percent market share,” Neil Sampat, a London-based analyst at Nomura Holdings Inc., wrote in a note today. “The hope has long been that much-needed consolidation will lead to the creation of a market leader, rationalisation of capacity and improving utilisation rates and margins” in Europe, he said.

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.

Sampat says antitrust issues “may be less of a concern,” as more than 20 percent of European stainless steel consumption is imported and European producers have “poor returns.”

Stainless Gains

Other stainless steel producers also advanced. Aperam, spun off by ArcelorMittal, climbed 18 percent in Amsterdam and Acerinox SA jumped 4.9 percent in Madrid.

“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 also covers ThyssenKrupp, said by phone from Frankfurt. “As Outokumpu doesn’t have the money for a purchase, they’d need a deal with no cash involved.”

ThyssenKrupp will merge Inoxum with Outokumpu and keep a minority stake in the combination, with 18,000 workers and more than 10 billion euros ($13 billion) of sales, Rheinische Post said earlier, citing people close to the company that it didn’t identify.

“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.”

Annual Loss

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.

To contact the reporters on this story: Stefan Nicola in Berlin at; Firat Kayakiran in London at

To contact the editors responsible for this story: John Viljoen at; Reed Landberg at

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