Emirates Steel Arkan is pursuing a potential investment in Thyssenkrupp AG’s massive steel unit, with negotiations set to enter crunch time just as the German conglomerate’s incoming boss takes the reins, people with knowledge of the matter said.
(Bloomberg) — Emirates Steel Arkan is pursuing a potential investment in Thyssenkrupp AG’s massive steel unit, with negotiations set to enter crunch time just as the German conglomerate’s incoming boss takes the reins, people with knowledge of the matter said.
The Abu Dhabi state-backed group is emerging as the most serious contender to buy a stake in the Thyssenkrupp business and could make a formal bid in the coming months, the people said, asking not to be identified because the information is private.
One option being discussed envisions Emirates Steel Arkan taking a minority stake in Thyssenkrupp Steel as part of a business partnership, some of the people said. The Middle Eastern company would produce energy-intensive products in the United Arab Emirates using renewable power before shipping them to Germany, where Thyssenkrupp could shape them into finished products for the automotive industry, according to those people.
Thyssenkrupp rose as much as 5.7% in Frankfurt, the steepest intraday gain in more than a week. The shares are up around 12% this year, valuing the company at about $4.4 billion.
India’s JSW Steel Ltd. and buyout firm CVC Capital Partners have also expressed interest in the Thyssenkrupp steel unit in recent months, though discussions with those suitors aren’t currently as active, the people said.
Chief Executive Officer-designate Miguel Ángel López Borrego is inheriting the job of turning around Thyssenkrupp, with the tricky task of offloading the steel business set to be the most pressing when he starts on June 1. He faces many of the same hurdles as predecessor Martina Merz, who struggled to overcome pushback from unions, sizable pension liabilities and volatile earnings. Past attempts to merge the unit with a rival have also failed over disagreements on valuation as well as antitrust concerns.
Read More: Thyssenkrupp Slumps as CEO Quits Amid Slow Restructuring
Thyssenkrupp has also held preliminary talks with private equity firms over a sale of a minority stake in its marine systems business, which builds naval vessels, ships and submarines, the people said. Under Merz, the company paused plans to list a hydrogen electrolysis unit amid market turmoil.
To be sure, the appointment of López Borrego, currently head of German joining components maker Norma Group SE, has the potential to slow down any asset sales.
Incoming CEOs typically take time to review strategy, and López Borrego hasn’t earned a reputation of selling fast. Earlier this year, when heading car supplier Norma, the German-born Spaniard rejected takeover approaches from private equity firm Carlyle Group Inc., which offered to buy the company at a substantial premium, people familiar with the matter said earlier this year.
A representative for Emirates Steel Arkan didn’t immediately respond to a request for comment. Representatives for CVC, JSW Group and Thyssenkrupp declined to comment.
The United Arab Emirates created Emirates Steel Arkan, the country’s biggest steel and building materials company, in 2021 when sovereign wealth fund ADQ combined Emirates Steel Industries PJSC with Arkan Building Materials Co.
The company has supplied big-name construction projects including Dubai’s Burj Khalifa, the tallest building in the world, and Emirates Palace, according to its website.
–With assistance from Baiju Kalesh, Swansy Afonso, P R Sanjai and Paul Wallace.
(Updates with shares in fourth paragraph.)
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