Klöckner & Co's Strategic Pivot: Crafting a Precise Portfolio Path

Hierros Añon
Hierros AñonImage Source: Valancia Plaza

Synopsis

Klöckner & Co, based in Germany, plans to divest parts of its European commodity distribution business, receiving an offer from Spain's Hierros Añon S.A. for country organizations in France, the UK, the Netherlands, and Belgium. This strategic move aims to focus on higher value-added services, reducing exposure to volatile markets. The proposed sale aligns with Klöckner & Co's commitment to sustained profitability and future growth.

Article

Klöckner & Co, headquartered in Duisburg, Germany, has unveiled a strategic decision to sell segments of its European commodity distribution business. An irrevocable offer from Spain's Hierros Añon S.A. has been received, encompassing the acquisition of country organizations in France, the United Kingdom, the Netherlands, and Belgium. This move signifies Klöckner & Co's commitment to refining its portfolio and intensifying its focus on higher value-added business ventures.

The Management Board emphasizes the prioritization of businesses offering higher value-added products and services along the customer value chain, including processing and fabrication services. Such ventures boast higher profitability and more stable demand, attributed to long-term contractual relationships and strong customization. This strategic sale is positioned to significantly decrease the company's reliance on volatile commodity markets.

Post-transaction, Klöckner & Co will concentrate on its most substantial markets, emphasizing growth in North America and its attractive European activities in Germany, Austria, and Switzerland (DACH). Guido Kerkhoff, CEO of Klöckner & Co SE, views this move as a pivotal step in focusing on less volatile, higher value-added businesses, aligning with the company's ongoing portfolio optimization.

The country organizations in France, the United Kingdom, the Netherlands, and Belgium currently employ approximately 1,500 people, contributing €621 million in sales during the first nine months of 2023. This accounts for around 10% of Klöckner & Co's total sales volume. Despite a negative EBITDA of €19 million in the same period, the proposed sale is expected to have a considerably positive impact on Group EBITDA from 2024 onwards.

While the transaction anticipates a one-time negative effect on Group equity of approximately €210 million, the equity ratio of the remaining Group is expected to rise to approximately 51%. Furthermore, Klöckner & Co is projected to generate over 50% of its sales in North America post-closing.

The proposed transaction is subject to information and consultation procedures with relevant employee representative bodies, customary regulatory approvals, and closing conditions. If accepted, the closing is anticipated to occur in the first half of 2024.

Conclusion

In conclusion, Klöckner & Co's decision to divest parts of its European commodity distribution business marks a strategic shift toward higher value-added services. The offer from Hierros Añon S.A. for country organizations in four European nations aligns with the company's commitment to sustained profitability and future growth. By concentrating on less volatile business segments, Klöckner & Co aims to optimize its portfolio and enhance its focus on strategic markets, particularly in North America.

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