Liberty Steel Door Open for Thyssenkrupp Steel Unit Deal
Handelsblatt reported that ThyssenKrupp’s announcement caught Liberty Steel’s boss Mr Sanjeev Gupta off guard as it was only on Monday that the Liberty Steel had updated their offer for the steel division of ThyssenKrupp in order to come closer to the ideas of the Ruhr group and could also have been ready for further negotiations. Mr Gupta told Handelsblatt that we believe we could have dispelled the concerns later. Another media report quoted a Liberty spokesperson as saying that "Discussions have been suspended at this stage due to differences in pricing expectations. However we are keeping the door open. Liberty remains confident that it has put forward the only long term sustainable plan for Thyssenkrupp's steel business and we will continue to engage to seek to eliminate the valuation gap in due course."
Despite the gloomy outlook for the workforce, IG Metall is generally positive about the end of the talks. Board member at IG Metall and vice-chairman of the supervisory board at Thyssen-Krupp Mr Jürgen Kerner said "It is good that there is now clarity on this point. Now all resources have to be used to make the steel sector fit for the future. We are still convinced that, given the immense need for investment, it will not work without substantial commitment from the state in terms of bridge financing."
The discussion about a spin off of the steel division is as old as the ThyssenKrupp group itself. When the two predecessor companies Krupp and Thyssen merged in 2000, there was already a fixed plan to list the steel division on the stock exchange. As an independent unit, the company part should form the platform for the consolidation of industry in Europe. When the capital markets collapsed after the turn of the millennium, management had to bury the plans. Steel became a core business again, but it remained a foreign body that led a life of its own. Little has changed since then, no matter who took the lead. In the past 20 years, as many strategies have been designed for ThyssenKrupp Steel as they have been thrown overboard. A number of potential buyers had canceled discussions until only Liberty Steel was left.
GroupCEO Ms Martina Merz will now stick to the area, at least for the time being. What role the subsidiary with its 27,000 employees should play in the group, however, is left open. The hope is that a place can already be found in the Group of Companies she designed. But it won't be that easy. The industry is facing a radical change. Customers, especially from the automotive industry, want steel that is produced in a climate neutral way. ThyssenKrupp, like the rest of the industry, must adapt to this request and convert its steelworks accordingly. The way to carbon dioxide free steel production is via hydrogen and will cost ThyssenKrupp ten billion euros alone.
On March 12, the company's supervisory board and board of directors want to discuss how the division should proceed. A reintegration into the group of companies or an IPO, which could be controlled through an interim participation of a financial investor are in the room. Both can be viable options. The board is also officially examining spin off of the division. But from the point of view of many observers, the hurdles for this are very high. Because the challenges that ThyssenKrupp Steel is facing harbor a great risk for investors.
Thanks to the upturn in the economy, the steel division made it back into the black at the end of the year. But the burdens from overcapacities in Europe and the regulatory requirements for climate protection are immense.