UK-based steel and metals titan LIBERTY Steel Group has put in a bid for the lossmaking steel unit of Germany's Thyssenkrupp. If successful, it would propel the company and its owner, Sanjeev Gupta, to the upper echelons of European industry.
Image: LIBERTY Steel Group
Liberty House confirmed this morning that it had made a non-binding offer for its German competitor, which has attracted interest from other potential investors, after a report in Der Spiegel magazine yesterday.
The bid comes from a run of acquisitions by Mr Gupta in recent years, ranging from mining and metals to banking and renewable energy.
The value of the bid has not been revealed though Thyssenkrupp shares rocketed by 20% following the news in Der Spiegel, before settling on 15% late this morning.
If the acquisition is successful, it would merge Europe's fourth and second-largest steel producers, both of which run facilities that form the bedrock of the continent's manufacturing sector.
Liberty Steel also operates mines and metals plants across Australia, North America and India and sees global revenues of some $15 billion (€12.5 billion) and employs 30,000 people. Thyssenkrupp's Steel Europe generates sales of €8.9 billion and has 27,000 employees.
Any potential acquisition would, however, face strong opposition in Germany from trade unions, who are concerned about job cuts and are lobbying the Bundesland government in North Rhine-Westphalia, the country's most populous state and its industrial hub, to take a stake in the beleaguered business.
The main three contenders to take over from Angela Merkel as Chancellor next year are all from North Rhine-Westphalia and will face political pressure to secure a future for Thyssenkrupp in the region
For its part, Thyssenkrupp has been open about its desire to refocus and find a way out of the steel industry, which is suffering from a combination of its exposure to a contracting automotive industry and the impact of the coronavirus pandemic. The company warned that this year's losses could be as high as $1 billion. Following pressure from shareholders, the sprawling conglomerate is being broken up by its management.
Earlier this year, the Thyssenkrupp divested its elevator business to a consortium of private equity firms for €17 billion and confirmed that it had held preliminary tie-up talks for the steel unit with Sweden's SSAB and India's Tata, as well as considering a merger with German rival Salzgitter.
Any offer by Liberty will come under intense scrutiny over how it will finance the takeover. The company's rapid growth in recent years has often relied on expensive borrowing related to unpaid customer bills, much of which has come from financial services group Greensill Capital, itself backed by Japanese technology investor SoftBank.
Mr Gupta has also relied on public authorities for funding by promising jobs and investment through the rescuing failing or unwanted factories.
A tie-in between the two steelmakers could help reduce overall costs in a sector struggling from overcapacity and stiff competition from foreign rivals, though EU regulators may prove another obstacle.
Last year, Brussels stopped a proposed merger between Thyssenkrupp and Tata Steel's European arm over concern about competition.
Both Thyssenkrupp and Liberty declined to comment.
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