Thyssenkrupp is considering a spin-off of its ailing steel business, sending the German group’s shares up more than 7 per cent as shareholders seized on another possible solution for a division that has dogged the company.
The former conglomerate, which still employs more than 100,000 people, has been trying to carve out a future for the unit since EU competition regulators blocked a tie-up with India’s Tata in 2019.
Potential mergers with Sweden’s SSAB and domestic rival Salzgitter have been mooted, though neither company has expressed an interest. UK industrial tycoon Sanjeev Gupta has launched a bid, which the company is assessing. Workers’ representatives have objected to the approach from Mr Gupta’s Liberty Steel, fearing job losses.
Thyssenkrupp’s willingness to explore spinning off the business comes as the outlook for the steel industry shows tentative signs of brightening. Global carmakers, the division’s biggest customers, are enjoying a rebound, while steel prices have shot higher in recent weeks.
Spot prices for steel have hit the highest level in more than nine years, outpacing a surge in those for iron ore, according to data from S&P Global Platts.
Having an independently listed steel unit would make it easier for potential suitors to buy into the business in the event that a sustained recovery made the division more attractive, people familiar with the matter said.
Thyssenkrupp said on Monday that independently developing the steel business, which lost almost €1bn last year, “remained an option”. The group declined to comment on the potential spin-off, which was first reported by Bloomberg.
After selling its prized lift and escalators business last year for €17.2bn, Thyssenkrupp is not strapped for cash. But the group lost more than €5.5bn in the last financial year, and its chief executive, Martina Merz, has promised to “stop the bleeding”.
A decision on the steel division, which employs roughly 27,000 people, is expected in the spring. Its future is likely to become a political lightning rod in an election year in Germany.
Thyssenkrupp’s Duisburg mills are situated in the heart of North Rhine-Westphalia, the state run by Armin Laschet, now a frontrunner to succeed Angela Merkel as German chancellor after being elected as head of one of the country’s ruling parties, the Christian Democratic Union, over the weekend.
Mr Laschet also sits on the advisory board of Thyssenkrupp’s largest shareholder, the Krupp foundation, which has a roughly 21 per cent stake. The foundation relies on Thyssenkrupp’s dividends, currently suspended, to fund its philanthropic activities.
Thyssenkrupp said last month that it would no longer pursue the option of Germany taking a stake in the division, which operates the largest steel manufacturing site in Europe. However, it did not rule out the prospect of other forms of financing from Berlin.
According to the company, keeping the steel unit competitive requires investments of approximately €570m a year, and a further €800m is needed over the next five years to modernise its facilities.