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 almost unchanged at 0837 GMT after falling as much as 6.2%.
“To end talks also shows a position of strength,” a local trader said, adding Thyssenkrupp’s steel unit had improved markedly in recent months.
The move comes after Sweden’s SSAB last month abandoned plans to buy the Dutch operations of India’s Tata Steel, a sign of 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 seen by Reuters.
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.
It said it was keeping the door open for talks and that it would “continue to engage to seek to eliminate the valuation gap in due course.”
($1 = 0.8306 euro)
Reporting by Christoph Steitz, Tom Kaeckenhoff and Arno Schuetze in Frankfurt; Editing by Nick Macfie, Matthew Lewis and David Evans