A takeover of Thyssenkrupp Steel Europe by Liberty Group is less likely to attract as significant competition concerns from the European Commission than the attempted Tata Steel Europe/Thyssenkrupp joint venture did, according to research firm Jefferies Oct. 21.
The main reason for this is that Liberty is currently not a major supplier to the automotive industry, Jefferies said. Whereas a Tata/Thyssenkrupp steel major would have had a combined market share of 25% in Europe, a Liberty and Thyssenkrupp business together would amount to a “sub-10%” exposure, reflecting a tonnage-based exposure of “less than one-third that of Tata Steel”, Jefferies estimates.
In 2019, the EC had concerns over metallic coated and laminated steel for packaging applications and galvanized flat carbon steel for the automotive industry and eventually were terminated by Thyssenkrupp and Tata.
Jefferies highlighted that Liberty does not publicly break down plant-by-plant market exposure but estimates that Liberty’s exposure to packaging steel is less than Tata’s 12% in Europe, while Thyssenkrupp has a 15% market share.
Competition authority hurdle limited
“We believe the new, conceptual deal would create significantly lower market shares in those end markets and thus be more palatable for the EC,” the Jefferies report said.
Liberty mad a non-binding offer Oct. 15 to acquire Thyssenkrupp’s steel assets, but did not disclose any financial details and Thyssenkrupp reiterated it would hold non-exclusive talks with other potential bidders as well.
There have been previous reports that Swedish steelmaker SSAB would be a suitable partner for a tie-up, while German steelmaker Salzgitter denied any current talks. A revival of merger talks between Tata and Thyssenkrupp has also been under discussion, as a solution continues to be sought for the troubled UK Port Talbot plant, sources close to the company have said that the companies mentioned in the press reports are still not out of the question.
Semis producer HKM could benefit from takeover
Market participants told S&P Global Platts that Liberty’s bid for Thyssenkrupp was not unexpected, with the UK-based steel company having pursued several other ventures over the last few years.
Semis producer Huettenwerke Krupp Mannesmann (HKM) — jointly owned by Salzgitter, Vallourec and Thyssenkrupp — has seen its slab output falter in recent years. However, there is growing optimism among market participants that the potential sale could support the struggling mill.
“Liberty Steel buys slab and Thyssenkrupp has not [produced] slab to a satisfactory level so [the bid] is not surprising. They [Liberty] want to boost their production by supplying slabs from Germany,” a German distribution source said.
A German trader said the potential acquisition could mean a “vast improvement” in productivity for HKM, adding it could be a “win-win for both parties — if SSAB doesn’t slip in at the last moment.”
— Laura Varriale, Amanda Flint
