UPDATE 2-Outokumpu shareholders approve Thyssen deal

Thu Mar 1, 2012 10:12am EST

* Shareholders approve share issue plan

* Share issue part of financing Inoxum acquisition plan

* Deal seen risky but necessary (Adds quotes, share reaction)

By Terhi Kinnunen

HELSINKI, March 1 (Reuters) - Finnish group Outokumpu's shareholders approved a rights issue for its 2.7 billion euro ($3.6 billion) acquisition of ThyssenKrupp's stainless steel unit, a deal aimed at boosting profitability and fending off Asian rivals.

The deal for Inoxum, expected to close by the end of 2012, will make Outokumpu the world's No.1 stainless steel producer. It is currently No.4 in Europe where rivals include Aperam - spun off by ArcelorMittal last year - and Acerinox.

Some shareholders questioned the deal price at a meeting on Thursday and asked whether two loss-making companies could turn profitable, but accepted the plan, which analysts say will help the company improve margins and cut overcapacity.

"In a business sense the deal is good. It was starting to appear, more and more, that Outokumpu would not have done well alone," said Swedbank analyst Erkki Vesola.

Outokumpu's bigger-than-expected fourth-quarter loss of 71 million euros underscored its need for change.

The acquisition will be partly funded by a 1 billion euro rights issue of new Outokumpu stock, a move approved by shareholders on Thursday. Outokumpu will also take on liabilities of 422 million and issue a loan note of 235 million to ThyssenKrupp.

Some investors questioned the deal, with one comparing Outokumpu to another struggling Finnish company, Nokia .

Nokia's joint venture with Germany's Siemens, Nokia Siemens Networks, had been "a complete economic failure," the shareholder said.

Outokumpu, however, says it aims to achieve cost synergies of between 225 million and 250 million euros by 2017 at the latest.

Chief Executive Mika Seitovirta said the deal will also help to it expand its presence outside Europe as the new firm will also have production in the United States, Mexico and China.

"Outokumpu will become global, we have been suffering from being so dependent from Europe," he said.

Finnish state investment agency Solidium as well as shareholders KELA and Ilmarinen had already committed to subscribe to 37 percent of the rights issue.

Seitovirta told Reuters the deal was proceeding according schedule and the board would soon decide on details of the share issue, which is expected to be carried out during the first half of the year.

"All in all the whole deal is moving forward as planned," he said.

Shares in Outokumpu were 1.1 percent lower at 5.16 euros by 1455 GMT, about 37 percent below this year's high of 8.21 euros, reached in January, a few days before the deal was announced. ($1 = 0.7450 euros) (Editing by Helen Massy-Beresford and Mark Potter)