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Thyssen announces capital increase as U.S. deal sealed

Posted by: Admin | Posted on: November 30th, 2013 | 0 Comments

FRANKFURT (Reuters) – Germany’s ThyssenKrupp (TKAG.DE) announced plans to for a much-needed capital increase after striking a deal to sell its U.S. steel plant to ArcelorMittal (ISPA.AS) and Nippon Steel Sumitomo Metal Corp (5401.T) for $1.55 billion.

It said late on Friday it would increase its capital by as much as 10 percent in a transaction excluding subscription rights, which would raise close to 1 billion euros ($1.36 billion) at its current share price.

ThyssenKrupp has been trying for more than a year and a half to find a buyer for its Steel Americas unit – comprised of the U.S. steel finishing plant and steel slab mill CSA in Brazil – which has drained billions from the company for the past few years and been an obstacle to raising fresh funds.

While the deal to sell the U.S. plant in Calvert, Alabama leaves ThyssenKrupp with its 73 percent stake in Brazil’s CSA, it removes at least one millstone from the company’s neck.

To avert a drop-off in business at CSA, which has been sending part of its production to Calvert, the sale includes a six-year agreement for the U.S. plant to buy 2 million tons of steel slab per year from CSA, or 40 percent of the Brazilian mill’s capacity.

ArcelorMittal said it would source the remaining slab for the Calvert plant from its own facilities in the United States, Brazil and Mexico.

ArcelorMittal and Nippon Steel are financing the purchase, which ArcelorMittal said would yield about $60 million of annual savings, through a combination of equity and debt.


The deal to sell the U.S. plant has been expected to give a major boost to ThyssenKrupp Chief Executive Heinrich Hiesinger.

He has been trying to shift ThyssenKrupp away from the volatile steel business into higher-margin products and services such as elevators, submarines and factory components.

But he has fought an uphill battle since taking over in 2011 as the company was hit by scandals, while finances at the industrial conglomerate, a symbol of Germany’s industrial prowess, steadily deteriorated.

The company said on Friday that losses at Steel Americas, a regulatory fine and restructuring costs caused a third straight annual loss for the financial year through the end of September, though the loss narrowed to 1.5 billion euros from 5 billion a year earlier.

ThyssenKrupp said it would therefore pay no dividend to shareholders for a second year in a row but said its savings program and growth at its non-steel businesses should help it make significant progress toward break-even this year.

But in a setback, ThyssenKrupp said it agreed to take back Italian steel plant Terni and the VDM high-performance alloy unit from Outokumpu (OUT1V.HE) in exchange for an outstanding loan note, partly reversing last year’s sale of its stainless steel business to the Finnish company.

ThyssenKrupp said it would sell its 29.9 percent stake in the Finnish company but would take a significant loss on the stake’s 305 million euro book value as Outokumpu launches a rights issue.

ThyssenKrupp’s share closed down 0.8 percent at 19.27 euros on Friday, against a 0.2 percent rise in the DAX index .GDAXI of German blue chip shares.

($1 = 0.7345 euros)

(Additional reporting by Alexander Huebner, Matthias Inverardi, Clara Ferreira-Marques and Tom Kaeckenhoff; Editing by Tom Pfeiffer, Jonathan Gould and Eric Walsh)

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