German engineering giant Thyssenkrupp AG is in talks with Ternium SA to sell its large steel plant in Brazil, a step that would finish unwinding the German company’s unsuccessful investment push in the Americas, according to people familiar with the matter.
The discussions are at an advanced stage and could be concluded by year-end, those people said, adding there is no guarantee a deal will take place. One significant potential stumbling block is the fact that Ternium would likely want to pay less than the plant’s current book value of roughly €2 billion ($2.17 billion).
Any deal below that value would hit Thyssenkrupp’s equity cushion, which is already thin, according to analysts. It was unclear whether other bidders are also eyeing the steel-slab plant, which cost Thyssenkrupp roughly $6.8 billion to build when finished in 2010. In 2013, Thyssenkrupp sold its U.S. steel plant to ArcelorMittal and Nippon Steel & Sumitomo Metal Corp. for $1.55 billion.
Thyssenkrupp said in an emailed statement that the company is seeking to dispose of Companhia Siderúrgica do Atlântico, or CSA, adding it was a normal course of business to hold talks with potential buyers.
A spokeswoman for Ternium said in an emailed statement “Ternium has nothing to report at this time regarding recent rumors related to Thyssenkrupp’s sale of its Brazilian facility CSA.”
Ternium is a Luxembourg-based producer of flat and long steel products with a strong presence in Latin America.
CSA has an annual production capacity of 5 million tons. The plant swing to a €39 million operating profit in the third quarter of the fiscal year ending Sept. 30, up from a €25 million loss in the same quarter last year.
Selling the Brazilian steel unit, Companhia Siderúrgica do Atlântico, or CSA, would help Thyssenkrupp Chief Executive Heinrich Hiesinger’s effort to shift the company away from steel operations.
Steel prices in Europe have come under pressure in recent years, due to anemic steel demand growth and a sudden flood of steel shipments from China, where shrinking demand led to a glut in steel production. Large steel producers in Europe such as Thyssenkrupp, ArcelorMittal and Tata Steel Ltd have responded to the supply glut over the years by shutting loss-making production capacity, laying off thousands of workers and/or disposing assets.
Source:WSJ.Com