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ThyssenKrupp and Outokumpu to Combine Stainless Steel Businesses

02/01/2012 - ThyssenKrupp and Outokumpu announced the combination of Outokumpu with Inoxum, the stainless steel unit of ThyssenKrupp, to create a new global leader in stainless steel. Agreements have been approved by the Supervisory Board of ThyssenKrupp AG and the Outokumpu Board of Directors.

ThyssenKrupp and Outokumpu announced the combination of Outokumpu with Inoxum, the stainless steel unit of ThyssenKrupp, to create a new global leader in stainless steel. Agreements have been approved by the Supervisory Board of ThyssenKrupp AG and the Outokumpu Board of Directors. The total consideration values Inoxum at approximately EUR 2.7 billion.
 
Under the agreement, ThyssenKrupp will obtain a 29.9% stake in the new company for its transfer of Inoxum. In addition, Outokumpu will pay EUR 1 billion in cash to repay ThyssenKrupp’s financial receivables toward Inoxum and will assume an additional EUR 422 million of third-party financial liabilities and pension liabilities of Inoxum (as of Sept. 30, 2011). ThyssenKrupp will also retain financial receivables from Outokumpu worth a nominal EUR 235 million (as of Sept. 30, 2011).
 
The combination is subject to a number of conditions, including regulatory approval. As part of the transaction, Outokumpu will increase its capital, which is subject to approval by the Outokumpu shareholders. The transaction is expected to be completed by the end of 2012.
 
The combination will create an entity with sales of around EUR 11.8 billion (annualized pro forma figures for the 12-month period ended Sept. 30, 2011) and more than 19,000 employees worldwide. The companies note that the product ranges and customer segments of the two partners are complementary. Outokumpu is a leader in austenitic and duplex steels, which are used in the chemical and energy sectors among others. Inoxum is one of the leaders in ferritic, nickel-free steel for the automotive and white goods industries, and a supplier of high-performance alloys, e.g., for the aircraft industry.
 
The combined entity will operate under the name of Outokumpu, which will continue to be headquartered in Espoo, Finland, and listed on the NASDAQ OMX Helsinki Stock Exchange. Mika Seitovirta, Chief Executive Officer of Outokumpu, will continue as the CEO of the combined entity. ThyssenKrupp will seek one seat on the Outokumpu Board of Directors. Solidium, a Finnish government-owned investment company with a current shareholding of 30.8% in Outokumpu, has committed to support the transaction by participating in the Outokumpu capital increase.
 
 “The combination of Inoxum and Outokumpu is an important milestone in the implementation of our strategic way forward,” said Dr. Heinrich Hiesinger, CEO of ThyssenKrupp. “The transaction is based on a compelling industrial rationale that is expected to enable the combined entity to compete more effectively in the global marketplace. We believe that the transaction opens up a promising perspective and is therefore also in the best interest of Inoxum’s employees. ThyssenKrupp will improve its financial flexibility thanks to this transaction and further sharpen its profile, bringing us one step closer to our target of a diversified industrial group.”
 
Hiesinger added that Clemens Iller, the CEO of the Stainless Global business area and later Inoxum, will continue to head Inoxum until the closing and will then take on other duties at ThyssenKrupp.
 
Seitovirta said: “We see considerable growth opportunities by joining forces, especially in the Americas and Asia. Outokumpu will be a highly efficient, innovative, and reliable partner for its customers, and will offer enhanced stability and attractive development prospects to its employees.”
 
The planned synergies are to be achieved through more efficient capacity utilization in Europe, joint benefits in procurement and energy costs, as well as supply chain and sales optimization. Outokumpu plans to reduce the melting capacity via the closure of the melt shop at the German production site in Krefeld, which currently has approximately 400 employees. The melt shop in Bochum, which currently has 420 employees, will be preserved at least until the end of 2016 and will be reviewed for cost effectiveness during that period.
 
To reduce the social impact on the employees, an agreement was reached between the negotiating partners and the employee representatives including rules for site and employment protection. The agreement also generally excludes compulsory redundancies until the end of 2015 for all German production sites. All German production sites of Inoxum will be preserved without restrictions at least until 2015.
 
The melt shop in Krefeld will be gradually shut down until the end of 2013. At least until that time the strip casting equipment will continue to operate. There will be an enhancement of the cold rolling facility in Krefeld, which includes the establishment of a research and development center and the transfer of an additional cold rolling volume of 70,000 to 90,000 tonnes per year to Krefeld and Dillenburg. For the German sites and for the strengthening of R&D, a total amount of EUR 20 million will be provided by 2017.
 
ThyssenKrupp has committed to offer alternative jobs within ThyssenKrupp for up to 600 of the employees in Germany currently employed at the Inoxum sites.
 
ThyssenKrupp had decided to divest Inoxum in May 2011. Overall, the divestment program comprises businesses with total sales of around EUR 10 billion. With the signing of the Inoxum transaction, ThyssenKrupp has already signed or closed transactions comprising around 80% of the sales to be divested. The disposal processes for Waupaca and Tailored Blanks are also proceeding as planned.