Thyssenkrupp Weighs Steel-Unit Spinoff as M&A Alternative

Thyssenkrupp AG is considering listing its steel division on the stock market amid mounting opposition to a potential sale to Liberty Steel Group, according to people familiar with the matter.

Thyssenkrupp executives are studying the idea of handing existing shareholders stock in the steel unit, the people said, asking not to be identified because the information is private. Some supervisory board members have called on Thyssenkrupp to explore an alternative to the Liberty sale after union officials and some large shareholders raised concerns, the people said.

Some of them pointed to a similar transaction that didn’t end well for the Essen, Germany-based company, which in 2012 sold its stainless steel unit Inoxum to Outokumpu Oyj only to buy back some assets a year later. The considerations come ahead of a binding bid Sanjeev Gupta’s Liberty plans to make later this month, the people said.

No final decisions have been made on whether to opt for a sale or spinoff of the unit, the people said.

Developing the business by itself remains an option for Thyssenkrupp, a spokesperson for the steelmaker said, declining to further comment. A spokesman for Liberty declined to comment.

Thyssenkrupp rose as much as 7.8% in Frankfurt after the news and was up 6.7% as of 4:15 p.m. local time, valuing the company at roughly 6 billion euros ($7.2 billion). The stock climbed earlier in the session amid robust steel prices.

A spinoff would represent yet another twist in Thyssenkrupp’s years-long effort to find a lasting solution for its steel unit, which employs about 27,000 people and is one of the leading metal suppliers to Germany’s auto industry. Thyssenkrupp has confirmed it’s in talks with London-based Liberty over a sale of the division, which has been struggling amid a global steel glut and large pension deficits.

Shareholder Concerns

Representatives for Thyssenkrupp’s biggest shareholder, the Alfried Krupp von Bohlen und Halbach Foundation, have raised concerns about the viability of Liberty’s bid and funding model with management, according to people familiar with the matter. The foundation owns 21% of Thyssenkrupp’s outstanding shares, and the chairwoman of its board of trustees, Ursula Gather, sits on the company’s supervisory board.

Thyssenkrupp’s executive board should “examine all options in order to be able to make the best possible decision for the steel division,” said Barbara Wolf, a spokeswoman for the foundation.

Some Thyssenkrupp stakeholders have also voiced concern about the transparency and reliability of Liberty’s financing for a transaction, the people said. Liberty Steel is part of GFG Alliance Ltd., a loose structure of companies owned by members of Gupta’s family. It has drawn the spotlight for its rate of expansion in the past five years. GFG has also faced scrutiny for the opaque structure of its business and heavy reliance on financing from banker Lex Greensill’s eponymous firm.

Once synonymous with German industrial prowess, Thyssenkrupp is fighting for survival. The Covid-19 pandemic has intensified deep-seated structural issues at the company, which still employs more than 100,000 people.

The business case for making steel has slightly improved in recent months. Prices for the metal have increased as lower supply caused by the pandemic shutdowns last year were followed by stronger-than-expected demand in the second half of 2020.

European steelmakers are also expected to benefit from a general surge in the price of commodities as inflation rises and stimulus packages boost building activity.

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