Thyssenkrupp could sell Materials Services division
Germany’s thyssenkrupp AG is rumoured to be considering divesting its steel and materials distribution division, thyssenkrupp Materials Services.
The multi-industries group has for years strived to separate from its steel production division, tk Steel Europe. It is now in the process of selling a 50% stake in tk Steel to Czech group EPCG, which has already acquired 20%.
While tk Steel Europe has long been a problem child for the group, tk Materials Services has been performing reasonably well. It is one of the biggest steel distributors in Europe and beyond, with more than 300 sites across all continents, and an order volume of €12.1 billion ($13.5 billion) in the last fiscal year.
Good earnings in its international supply chain business led to an increase in adjusted Ebit last fiscal by 15% to €204 million. Tk Steel, on the other hand, posted negative Ebit of €770m.
If true, the divestment would sever thyssenkrupp’s ties to its history as a steel company, but would also generate cash for the other miscellaneous activities of the group.
Speculation over the sale was reported by Bloomberg earlier this week. In a statement sent to Kallanish, thyssenkrupp AG did not confirm the plan but did not explicitly deny it either.
A German industry observer tells Kallanish he heard of the rumour weeks earlier, with €2 billion touted as a target price, The price is fair in view of the division’s assets, he notes. Although he doubts the offer would lure too many bidders, he has heard of interest being expressed by Asian companies.
EU HRC market gears up for mill consolidation
The European hot-rolled coil (HRC) market is gearing up for potential consolidation over the coming year, as mills grapple with tough market conditions.
The share prices of key European producers have rallied in recent days, despite continued weakness in HRC prices. Global steelmaker ArcelorMittal’s shares traded above €22/share ($24/share) on the Luxembourg Stock Exchange at 12:30 GMT today, up from €19.70/share on 10 September. This strength is partly attributable to the expected release of economic stimulus measures in China, and the US Federal Reserve’s recent interest rate cut, sources suggest. But market strength could also be because of growing talk that a new wave of consolidation is on its way, fuelled by decarbonisation efforts and the strained positions’ of some mills.
There has long been talk that steel coil producer Tata Steel Netherlands could be sold, after the Dutch state agreed to contribute to its decarbonisation spend. Recent difficulties at Germany’s ThyssenKrupp have also sparked suggestions it could be an acquisition target. Czech Republic energy company EP Corporate Group (EPCG) recently completed its purchase of a 20pc stake in ThyssenKrupp’s Steel Europe division, and could increase this to 50pc in the near future. EPCG owner Daniel Kretinsky may be seeking a strategic partner to help run the business, sparking talks that other mills could bid for a stake in the company.
ThyssenKrupp shares were trading at €3.20/share on Deutsche Borse Xetra at 12:30 GMT today, up from €2.78/share on 10 September.
Concerns over strong positions in niche markets, particularly tin plate, saw Tata Steel and Thyssekrupp call off their proposed joint venture in May 2019. But the market is in a different position now. Some mills have reduced capacity but new entrants are trying to join the market as green producers. And the global market is oversupplied, putting European producers in a difficult financial predicament, especially given their capital-intensive efforts to decarbonise. In the case of ThyssenKrupp, expectations that the mill will reduce its production footprint could partially alleviate potential competition concerns in the event of a takeover.
