Thyssenkrupp approaches international peers to consolidate its steel business

Sources informed on Monday that Thyssenkrupp (ETR: TKA) is seeking to consolidate its steel business. The company is already negotiating with international peers over its loss producing segment.

Thyssenkrupp Steel Europe is the largest steelmaker in Germany that saw an around £322 million loss in the 1^st half of the current financial year.

Following the announcement, shares of the company were reported roughly 5.6% up on Monday. The German multinational conglomerate is currently more than 60% down year to date in the stock market.

Thyssenkrupp estimates a stronger hit to Q3 financial performance

Thyssenkrupp gave multiple profit warnings in recent months as investor confidence continued to fade away. The company also estimated a more pronounced hit to financial performance due to COVID-19 in the third quarter last week.

In 2019, Thyssenkrupp showed interest in a joint venture with Tata Steel in India. Later last year, however, it dropped the original plan and opted for selling its elevator unit instead. Ever since, the company has been weighing the benefits of consolidating its steel business.

But sources confirmed that the industrial engineering company is still in contact with Tata Steel to move ahead with its plan of consolidation.  Other competitors that are seeking a majority stake in the German steel business include China’s Baoshan Iron & Steel and Stockholm-headquartered SSAB, according to Handelsblatt.

None of the Thyssenkrupp’s international peers commented any further on the news. The company itself refrained from divulging any further information as well.

In its supervisory board on Monday, the company is also expected to discuss the merits of actioning its Plant Technology that manufactures fertiliser, chemical, and other relevant industrial plants.

COVID-19 delays Thyssenkrupp’s plans for consolidating steel business

Indicative bids, the sources added, were placed in April. The process, however, was put on hold due to the Coronavirus pandemic that has so far affected more than 176,500 people in Germany and caused over 8,000 deaths. The sources said:

“This will only go ahead if the Coronavirus impact is clear and bidders will be able to recalculate their asking prices.”

Prominent names like Italy’s Mair Tecnimont, Denmark’s FLSmidth, and Texas-headquartered Fluor were also implicated as being the part of the competition.

Thyssenkrupp’s struggle in the stock market, however, started way before the outbreak. Its performance in 2019 was also reported fairly downbeat with an annual loss of around 20%. The Essen-based industrial engineering and steel company currently has a market value of £2.61 billion.