ThyssenKrupp Said to Consider Holding on to Brazil Plant
ThyssenKrupp AG (TKA), the German steelmaker that’s spent 16 months trying to sell its Americas unit, may hold on to its plant in Brazil and sell only the U.S. operation, two people briefed on the discussions said.
A deal to divest the U.S. mill would require some of the Brazilian plant’s output be processed at the Alabama site, one of the people said, asking not to be named because the talks are confidential. Bids for the Brazilian facility have been too low, and ThyssenKrupp has accepted that the Steel Americas division won’t fetch its 3.4 billion-euro ($4.5 billion) book value and faces a further writedown, the other person said.
The company 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 “very advanced negotiations with a leading bidder on the sale,” Stefan Ettwig, a spokesman, said 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.
While ThyssenKrupp, Germany’s largest steelmaker, had previously planned to sign a deal before the end of the fiscal year on Sept. 30, Chief Executive Officer Heinrich Hiesinger said in an Aug. 13 earnings statement that “we will not make our decisions dependent on reporting deadlines.”
ThyssenKrupp’s preferred option remains to sell both plants to CSN and talks are continuing, one of the people said.
Steel Americas’ adjusted loss before interest and taxes totaled 162 million euros in the quarter through June compared with a loss of 262 million euros a year earlier.
ThyssenKrupp spent almost 12 billion euros on the Americas plants, resulting in an equity ratio -- or total equity to total equity and liabilities -- of 8 percent by June 30, down from 21 percent a year earlier. The ratio of net debt to equity, or gearing, almost tripled to 186 percent. Previous writedowns have amounted to 6.4 billion euros.
The company said last month that an unused 2.5 billion-euro committed credit facility with a group of banks, as well as other loans, may be terminated should gearing exceed 150 percent at the end of September.
ThyssenKrupp is preparing to sell shares valued at about 800 million euros as well as hybrid bonds, the two people said, confirming a Handelsblatt report from last week.
A share or rights sale remains an option and doesn’t need to be “coupled” with the Americas unit disposal, Hiesinger said last month.