ThyssenKrupp Selling Stainless Steel Unit

German steelmaker ThyssenKrupp AG is selling its stainless steel unit Inoxum to Finland's Outokumpu Oyj. 

ThyssenKrupp's management board has already approved the $3.54 billion deal.  The company says an agreement has been reached with union representatives on site.

From the company:

The Supervisory Board of ThyssenKrupp AG today approved the combination of Inoxum with the Finnish company Outokumpu. This creates the conditions for forging a leading supplier in the global stainless steel market with sales of around 11.8 billion euros and more than 19,000 employees worldwide. The combination is still subject to the approval of the regulatory authorities and the approval of Outokumpu’s shareholders for the planned capital increase at Outokumpu. We anticipate that the transaction will be completed by the end of 2012.

From then, the combined company will be led by Mika Seitovirta, Chief Executive Officer of Outokumpu. ThyssenKrupp AG will have a 29.9% shareholding in the new company and receive a seat on the Outokumpu Board of Directors.

As you know, we have been faced by major challenges in the stainless steel business for many years. The whole industry is suffering from wide price swings for raw materials and increasing imports from Asia.

In addition, costs have risen continuously – among other things for energy and environmental compliance – at the same time as prices have fallen. Europe also suffers from overcapacities. We have been affected by all these things. The closure of old facilities and the reduction of shifts had no lasting impact. Consolidation of the stainless steel industry is long overdue.

In May 2011, ThyssenKrupp AG decided as a strategic move to carve out Inoxum. The three options – IPO, spin-off or sale – were carefully examined. From an economic point of view the solution now found is the best of all the alternatives.

With Outokumpu we have found the ideal partner. The business, with around 8,000 employees and sales of around 5 billion euros, is one of the top companies in our industry. Our new partner has its own chromium mine and one of the world’s most advanced plants in Tornio, Finland.

The combination creates the conditions for the new company to play a strong and leading role on the global market. The product ranges and customer segments are an excellent fit. Outokumpu is a leader in austenitic and duplex steels, including for the chemical industry and the energy sector. Inoxum is one of the leading companies for ferritic, nickel-free steels for the automotive and white goods industries, and a major supplier of high-performance alloys – for example for the aircraft industry. The combination creates a company that will create significant synergies and have a global, competitive production network for a broad range of high-quality stainless products for all major customer groups.

Under the business plan for the new company, melting capacities in Germany are to be reduced. In intensive negotiations with Outokumpu, together with the employee representatives we were able to ensure that all Inoxum’s production sites in Germany will be retained unconditionally until at least 2015. Steelmaking operations in the Krefeld melt shop will be phased out by the end of 2013. The existing strip casting line will also be continued for at least this length of time. The melt shop at the Bochum site will be continued until at least the end of 2016 and its profitability reviewed. In addition, we have secured the long-term future of the cold rolling site in Krefeld as a Center of Excellence for the cold rolling activities of the combined company. A total of 20 million euros will be made available through to 2017 for the German sites and to strengthen research and development.

The investments for the planned relocation of the Benrath plant to Krefeld (Nifo) will be carried out unchanged. The first contract has already been placed for the new annealing and pickling line.

Compulsory redundancies are ruled out at all German production sites of Inoxum until the end of 2015. ThyssenKrupp has agreed to take on up to 600 employees from the Inoxum sites who are under threat of losing their jobs.

The other sites of the Inoxum group in China, Italy, Mexico and the USA and in the high-performance alloys sector (VDM) will not be affected by the restructuring measures under Outokumpu’s business plan. The ramp-up of the new melt shop in Calvert, Alabama, will proceed as planned.

The new company will operate under the name Outokumpu and have its headquarters in Espoo, Finland.

ThyssenKrupp and Outokumpu will hold a joint press conference tomorrow, which will also be broadcast on the internet.

Press conference on February 1, 2012 at 11.00 h