Cia. Siderurgica Nacional SA, Brazil’s third-largest steelmaker, has emerged as the leading bidder for ThyssenKrupp AG’s Brazilian and U.S. steel-plant assets, said people with knowledge of the talks.
ThyssenKrupp could sign an agreement with CSN, as the Sao Paulo-based company is known, on the plant in the state of Rio de Janeiro and on its Alabama site in coming weeks, said one of the people, who asked not to be named because talks are private.
ThyssenKrupp, Germany’s largest steel producer, has spent the past year figuring out how to dispose of the unprofitable Americas plants. Chief Executive Officer Heinrich Hiesinger is selling them as waning demand from the auto and construction industries and competition from China weaken prices and squeeze profit margins.
There’s no guarantee a transaction will occur. ThyssenKrupp is also still negotiating with Vale SA, which owns a minority stake and has a contract to supply ore to the Rio site, and the Brazilian government and its development bank BNDES on a deal for the assets, said the people.
If the parties can’t come to an agreement on a full sale of the Rio plant, another option ThyssenKrupp is considering is selling CSN a one-third stake, with Vale keeping a third and the German company holding the rest, said two of the people. If that plan were to succeed, the three may seek to raise about $750 million in capital to improve the plant, they said.
Vale doesn’t contemplate becoming an “active” player in the sale process and is only seeking to maintain its contracted rights over the asset, the Rio-based company said in an e-mailed statement today.
“We are in intense negotiations for Steel Americas,” Stefan Ettwig, a spokesman for ThyssenKrupp, said in an e-mailed statement today. “These negotiations include talks with our involved partner Vale, Brazilian development bank BNDES and Brazilian government circles.” CSN yesterday declined to comment in an e-mailed statement.
Shares of ThyssenKrupp climbed 7.1 percent, the most since Nov. 30, 2011, and closed at 14.33 euros in Frankfurt, narrowing this year’s decline to 19 percent. The stock, which traded at 2.63 times its three-month average volume, values the company at 7.37 billion euros ($9.66 billion). CSN lost 0.3 percent to 7.78 reais at 2:35 p.m. in Sao Paulo, heading toward its lowest close in a week.
The German company is unlikely to reach a deal with CSN before reporting fiscal first-half results on May 15, said one of the people. The company is seeking more than $3 billion, people familiar with the process said last week.
ThyssenKrupp shrank the pool of bidders for its U.S. and Brazilian assets last month, people familiar with the matter said on April 25. Japan’s JFE Holdings Inc. and Nucor of the U.S. are out of the running, they said. Ternium SA, Latin America’s second-largest steelmaker, said April 30 that it is no longer interested in the plant because of its valuation and industry conditions in Brazil.
In addition to CSN, U.S. Steel Corp. and a joint offer by ArcelorMittal and Nippon Steel & Sumitomo Metal Corp. were still in the running for the Alabama site, the people said last week.
An investor relations representative at Nippon couldn’t be immediately reached via e-mail for comment outside of regular business hours. A U.S. Steel spokeswoman declined to comment, as did a spokesman for ArcelorMittal.
ThyssenKrupp currently controls 73 percent of the CSA steel plant in the state of Rio de Janeiro. Vale, the world’s largest iron-ore producer and a supplier to the plant, owns the rest. The German company built the Brazilian facility, with a capacity of 5 million metric tons a year, to supply steel slabs to its mills in Calvert near Mobile, Alabama, and in Germany.
The Steel Americas business, labeled a discontinued operation, reported an adjusted loss before interest and taxes of 87 million euros in the fiscal first quarter, compared with a loss of 288 million euros a year earlier, spokesman Kilian Roetzer said at the time. ThyssenKrupp said in February that profit for the whole company shrank 38 percent in the period.
The company, based in Essen, Germany, in December canceled its dividend after posting a second straight annual loss following a 3.6 billion-euro writedown on the Americas unit.