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Thyssenkrupp ends talks with UK's Liberty on steel unit sale

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·2 min read
FILE PHOTO: A steel worker of Germany's industrial conglomerate ThyssenKrupp AG takes a sample of raw iron from a blast furnace at Europe's largest steel factory in Duisburg
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By Christoph Steitz, Tom Käckenhoff and Arno Schuetze

FRANKFURT (Reuters) - German conglomerate Thyssenkrupp ended talks to sell its steel division to Britain's Liberty Steel due to differences over value, the latest setback in efforts to consolidate the European sector.

Liberty Steel, led by commodities tycoon Sanjeev Gupta, last month submitted a firmed-up non-binding bid for Thyssenkrupp's steel unit, Europe's second biggest in terms of sales, which sources said included commitments to protect jobs and sites.

"We regret this step because we perceived Liberty Steel as a serious partner in the process," Thyssenkrupp Chief Financial Officer Klaus Keysberg said in a statement.

Thyssenkrupp's move to terminate talks shifts the focus to the group's two other scenarios for its steel division: keeping it or spinning it off to shareholders. Both would entail major additional cost and job cuts.

Shares in the company were down 4.8%.

"The steel business of Thyssenkrupp needs to be realigned and adjusted," the Alfried Krupp von Bohlen und Halbach foundation, Thyssenkrupp's top shareholder, said.

"Thyssenkrupp has no time to spare."

The move comes after Sweden's SSAB last month abandoned plans to buy the Dutch operations of India's Tata Steel, a sign of just how challenging consolidation is in a sector plagued by overcapacity.

In an internal memo to staff, Keysberg said differing views over the value of the division, financing structure and guarantees were the key reasons to end discussions.

"Overall, ideas were so far apart that continuing discussions wouldn't have gotten us any further," Keysberg said in the memo.

Liberty Steel's bid assumed a negative equity value for Thyssenkrupp's steel division of more than 1.5 billion euros ($1.8 billion), according to people familiar with the matter.

Recent broker reports were more optimistic on the back of first-quarter results released last week, putting that number somewhere between 400 million euros and zero.

Liberty Steel, Europe's fourth-largest steelmaker, earlier this week made a new offer addressing some of the concerns, one of the people said.

Gupta told German business paper Handelsblatt on Thursday that Liberty Steel was prepared to resume negotiations with Thyssenkrupp, saying it was incomprehensible why the German group called off the deal without serious negotiations.

($1 = 0.8306 euro)

(Reporting by Christoph Steitz, Tom Kaeckenhoff and Arno Schuetze in Frankfurt; Editing by Nick Macfie, Matthew Lewis, David Evans and Jane Merriman)