Liberty Steel makes non-binding bid for Thyssenkrupp steel unit

Liberty Steel, founded by commodities tycoon Sanjeev Gupta, on Friday said it had made a non-binding offer for Thyssenkrupp’s steel unit, boosting shares in the conglomerate and setting off a new wave of consolidation in the steel sector.

A deal would combine the continent’s fourth- and second-largest steelmakers after a planned joint venture between Thyssenkrupp and Tata Steel was blocked in 2019.

“Liberty Steel is convinced that a combination with Thyssenkrupp Steel Europe can be the right answer from an economic, social, and environmental perspective,” it said in a statement, without disclosing financial details.

Thyssenkrupp shares surged as much as 23%, and the Essen-based company said it would carefully study the offer even as it continues talks with other potential partners.

Liberty said it was open to intensifying talks to explore making a binding offer for the unit. Germany’s most powerful union IG Metall has, however, opposed a potential bid, fearing it could lead to painful job cuts.

A sale of the steel business would mark a radical change in Thyssenkrupp’s composition and structure, following the divestment of its elevators business earlier this year.

Formed by Gupta last year, privately held Liberty Steel is a unit of Britain-based conglomerate GFG and comprises all of his family’s steel activities, with a view to a potential listing.

It has been on a European buying spree, most recently in France, where it acquired the Hayange business previously owned by British Steel.

In Europe, Liberty has 13 million tonnes of annual capacity, 72% of its total, and employs 17,000, compared with about 27,000 steelworkers at Thyssenkrupp.

A person familiar with the matter said Liberty was being advised by a consortium of banks led by Credit Suisse.

Its interest comes amid planned protests by steel workers to put more pressure on the government to bail out Thyssenkrupp’s steel unit, which made a nine-month operating loss of 700 million euros ($819 million).

A trader said the bid had “strong potential after a disastrous performance of the shares mirroring corporate chaos”.

Thyssenkrupp CEO Martina Merz said this week the company would consider all options for the unit, including selling a stake to the German government.

Economy Minister Peter Altmaier has so far opposed the idea, instead favouring support payments to help the industry transition to hydrogen-based steel production.

Thyssenkrupp is also exploring tie-ups with Germany’s Salzgitter, Sweden’s SSAB and Tata once again, sources have told Reuters.

The German IG Metall union rejected a takeover of Thyssenkrupp’s steel unit by Liberty Steel Group as it could lead to job losses and a breakup of the German company, its North Rhine-Westphalian regional leader told Reuters.

“This is exactly what we warned about,” Knut Giesler said. “Politicians must act now.”

Meanwhile, Anglo-Australian mining group Rio Tinto warned on Friday that a resurgence in the coronavirus cases was putting global economic growth at risk, and that steel production outside China has sharply dropped even as stimulus measures prop up demand in the top consumer.

Worldwide trade has been showing signs of recovery as countries emerge from lockdowns, but economists still see challenges with fresh outbreaks adding to the uncertainty about the path of the pandemic and its economic fallout.

“Global economic activity in the third quarter was generally strong, helping to sustain optimism for a widespread recovery in 2021,” Rio said in its quarterly production report.

But data suggests “the rate of recovery in growth is slowing in most economies, with pent-up demand dissipating, and the rise of renewed lockdowns threatening recovery”, it added.

China’s commodity-intensive stimulus measures have supported record demand for iron ore but steel production outside of China remains down significantly year on year, the world’s biggest iron ore mining company said.

Inventories of iron ore, a steelmaking ingredient, are expected to grow modestly amid strong fourth-quarter shipments from major producers and as China’s steel consumption eases from record highs and scrap consumption increases, Rio said. However, steel production in Japan, South Korea, Taiwan and Europe are showing signs of recovery, it added.

Rio posted a 4.6% drop in third-quarter iron ore shipments to 82.1 million tonnes due to planned maintenance at Australia’s Dampier Port, ahead of a UBS estimate of 81.9 million tonnes.

Reuters