By Christoph Steitz, Tom Käckenhoff and Edward Taylor
FRANKFURT (Reuters) - Thyssenkrupp is in talks with Kloeckner & Co over future cooperation in materials trading, but is not exploring a near-term takeover of the metals firm, three people familiar with the matter said.
The chief executives of both companies have been talking regularly for months, the people said, adding that discussions are open-ended and may not produce any concrete results.
Shares in Kloeckner & Co rose 12.6% on Friday, boosted by a report in German business daily Handelsblatt that cash-strapped Thyssenkrupp is in talks to buy the group, raising its market capitalisation to 544 million euros ($602 million).
Thyssenkrupp shares were up 1%.
"Is it about a takeover or a merger? There are no details," said Michael Muders, fund manager at Union Investment, a top-20 shareholder in Thyssenkrupp. "That means it is unclear how much sense a deal would make, what the level of synergies is, and what strategy stands behind it."
The three sources said a takeover of Kloeckner & Co, which would have to be made public under German capital market regulation, was currently not in the works. Thyssenkrupp and Kloeckner & Co declined to comment.
One of the sources said while an outright takeover of Kloeckner by Thyssenkrupp was unlikely, if both were to agree on a deal at some point it could take place via a swap, under which Kloeckner would take a minority stake in the combined business.
Thyssenkrupp is banking on the sale or listing of its elevators division, seen worth 14 billion euros, to bring in badly needed funds to finance the ailing conglomerate's turnaround.
It has suffered in recent years from a weakening economy, a structure seen as too complex and dwindling investor faith.
"It's strategically difficult for Thyssenkrupp to sell their lucrative elevator business in order to buy into struggling steel trading also as the economy seems to be near a peak," a Frankfurt-based trader said.
NO QUICK FIX
Kloeckner & Co, whose shares are trading at decade lows under pressure from weakening industrial demand in Germany and abroad, has for years been the focus of speculation on a possible tie-up with Thyssenkrupp.
This has mainly been driven by CEO Gisbert Ruehl, who as recently as three weeks ago said he was regularly meeting with Thyssenkrupp boss Guido Kerkhoff and would be open to taking a minority stake in Thyssenkrupp's materials trading division.
Kerkhoff, who must deliver after a fourth profit warning on his watch sent the group's shares to a 16-year low, has put a deal to buy Kloeckner & Co at the centre of a turnaround plan he is working on, Handelsblatt said.
The report also said that Thyssenkrupp was considering buying smaller steelmaker Salzgitter, sending its shares 1.5% higher. Salzgitter CEO Heinz Joerg Fuhrmann has in the past not fully ruled out that a deal might emerge one day.
Thyssenkrupp in May unveiled a major restructuring, effectively looking for partners for its business divisions, including Materials Services, where it could sell a minority stake to a strategic partner.
Thyssenkrupp Materials Services, the conglomerate's biggest unit by revenues, had sales of 14.65 billion euros in the last financial year, more than twice Kloeckner's 6.79 billion.
So far, Kerkhoff has struggled to gain traction on his strategic initiatives even as Thyssenkrupp's financial health deteriorated, narrowing the scope to be acquisitive and raising pressure to liquidate assets, say analysts.
"Thyssenkrupp has its hands full finding a buyer for its elevator division. Buying Kloeckner is not going to fix its problems," one of the people said.
($1 = 0.9036 euros)
(Additional reporting by Douglas Busvine and Michelle Martin; Editing by Thomas Escritt, Jane Merriman and Jan Harvey)