BRASÍLIA: Thyssenkrupp AG shares jumped Wednesday after the German industrial goods company said it would sell its Brazilian steel plant to Ternium SA for EUR1.26 billion ($1.33 billion), marking an end to its beleaguered steel operations in the Americas. The transaction, which is part of Thyssenkrupp’s strategy to cut steel exposure and focus on capital goods, will bring a EUR900 million write-down that will likely result in a loss for the fiscal year, but will also reduce net debt, the company said. The deal’s enterprise value is EUR1.5 billion. The sale agreement is the latest sign of consolidation in an industry exploring merger and acquisition opportunities to cope with poor market conditions. Steel prices in Europe have been pinched in recent years by anemic growth in demand, compounded by inexpensive imports from China.
Investors welcomed the sale, with Thyssenkrupp’s shares leading the DAX Index. At 10 a.m. GMT, shares were 5.4% higher at EUR24.38. “This ends the company’s expensive excursion in the region,” one Frankfurt trader said. He said this was good news, despite the write-down and in his opinion, an unimpressive price tag. Thyssenkrupp began building the Brazilian mill in 2007 on the Atlantic coast in the state of Rio de Janeiro. However, costs spiraled out of control, partly because the facility was built on swampy terrain that couldn’t support the plant’s foundation. Thyssenkrupp also faced disputes over the mill’s environmental impact, further complicating operations.
“Through the sale, Thyssenkrupp achieves a significant milestone and can close the very negative chapter of Steel Americas,” DZ Bank said in a note. When Heinrich Hiesinger became chief executive in 2011, he put the company’s operations under review and sought a buyer for the Brazilian plant and another in Alabama, which Thyssenkrupp agreed to sell to a consortium in 2013. The financial fallout of the Americas operations prompted the resignation of Thyssenkrupp’s supervisory board chairman in 2013 and led to sizable write-downs and losses at the beginning of the decade. The Wall Street Journal reported in October that Thyssenkrupp was in discussions with Luxembourg-based Ternium over a deal in Brazil. On a conference call Wednesday, Thyssenkrupp said it remained in talks with several parties about a tie-up for its European steel division. Mr. Hiesinger wasn’t specific, but late in 2016 he put India’s Tata Steel. among the candidates. Friedrich Geiger in Berlin contributed to this article.
