Tata Steel is planning to take a stake in Thyssenkrupp’s European steel unit, German business paper Rheinische Post reported on Friday, sending shares in the German steelmaker higher.
Tata Steel is planning to take a stake in Thyssenkrupp’s European steel unit, German business paper Rheinische Post reported on Friday, sending shares in the German steelmaker higher.
The paper said talks were at an advanced stage, citing government sources in Berlin.
Tata Steel, the second largest steel producer in Europe, put its loss-making British operations up for sale this week. That decision has raised expectations of a long-awaited consolidation of Europe’s battered steel sector, which is suffering from years of unaddressed overcapacity.
Thyssen’s Steel Europe unit is profitable and a Tata-Thyssen combination excluding the UK is seen as most likely.
Shares in Thyssen jumped as much as eight per cent to a four-month high at 19.75 euros but pared gains somewhat after a person familiar with the situation told Reuters that Thyssen’s supervisory board had not yet discussed a possible tie-up.
Two sources with knowledge of the matter said that all of Europe’s steel producers were talking to one another but that nothing concrete was yet in sight.
Thyssen declined to comment, while a European spokesman for Tata Steel declined to comment.
Rheinische Post said Tata and Thyssen were discussing several scenarios, the most likely being a joint venture with Tata Steel holding an option to increase the stake later.
Analysts at Berenberg said it would make more sense for both Tata Steel and Steel Europe to sell shares in an IPO of such a joint entity as it was more likely to translate into significant financial returns for the parent companies. They said a combination of the two firms would lead to great-er pricing power.
