October 9, 2012 / 8:46 AM / 5 years ago

UPDATE 1-Outokumpu commits to selling Terni mill for Inoxum deal

* Offer to sell Terni mill binding

* Outokumpu shares fall 1.9 pct

* EU to decide on Inoxum deal by Nov. 16 (Adds analyst and CEO comments, details)

HELSINKI, Oct 9 (Reuters) - Finnish stainless steel maker Outokumpu said it was committed to selling an Italian mill to gain regulatory approval for a buyout of ThyssenKrupp’s Inoxum unit, a step some fear will water down the deal’s benefits.

The company announced earlier this month it would sell the Terni plant to appease the European Commission, which deemed its previous plan to sell Swedish operations as insufficient.

Outokumpu said on Tuesday its proposal was now binding, prompting its shares to fall 1.9 percent on fears a divestment of Terni - considered one of the most advanced steel mills in Europe - would make the 2.7 billion euro deal less attractive.

“I‘m quite sceptical on this one. The whole deal has been relying on the Terni mill, and most of the estimated synergies relate to it,” said analyst Markus Liimatainen from Helsinki brokerage FIM.

“It seems they are going to pay a hefty prize for shutting down German mills and selling Terni, which will then be a direct competitor for them.”

The Inoxum deal was forged to create the world’s top stainless steel producer and help the enlarged company to deal with overcapacity and price competition from Asia.

Outokumpu said the planned divestment would neither include Terni’s bright annealing production line nor its tubular unit, and reiterated it expects 200 million euro ($259 million) in annual savings from the Inoxum deal.

“The strategic importance of the Inoxum transaction remains unchanged,” Chief Executive Mika Seitovirta said in a statement.

The European Commission is due to rule on the Inoxum deal by Nov. 16.

$1 = 0.7711 euros Reporting by Jussi Rosendahl; Editing by Mark Potter

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