December 2, 2013 / 8:57 AM / in 4 years

UPDATE 2-Outokumpu shares surge on recapitalisation plan

* Shares soar as Terni mill fetches more than expected

* Sells Terni and other assets back to ThyssenKrupp

* Capital to be shored up by 650 mln euro rights issue

* Deal seen as major coup for Nokia’s former CEO Ollila (Recasts with investor comments, chairman background)

By Jussi Rosendahl

HELSINKI, Dec 2 (Reuters) - Shares in Finland’s Outokumpu , the world’s No. 1 stainless steel maker, jumped more than 30 percent as investors welcomed its plan to shore up finances by selling some assets, securing a loan and issuing new shares.

Analysts said that Outokumpu had achieved a better-than-expected price for its mill in Terni, Italy, which it is selling, along with alloy unit VDM, back to ThyssenKrupp in exchange for cancelling a 1.25 billion euro ($1.7 billion) loan.

Loss-making Outokumpu, hit hard by Europe’s economic slowdown and by overcapacity in the industry, also said it will raise 650 million euros through a rights issue and that it had secured a new 500 million euro loan facility.

The stock rose nearly 20 percent by 1320 GMT, but is down some 70 percent since it bought ThyssenKrupp’s stainless steel unit Inoxum last year. Outokumpu is keeping Inoxum’s five German production plants - one of which it plans to close, one in the United States, one in Mexico and one in China.

Fund manager Mika Heikkila at Taaleritehdas Asset Management said the price it realised for the assets was higher than he had feared when the EU monopoly watchdog told Outokumpu to sell Terni as a condition for approving the Inoxum deal.

“For the Terni mill, it could have been a deal at a bottom price at the bottom of the market cycle, so against expectations, it was a good deal for Outokumpu,” he said.

“The deal also cleverly ties together the asset sales and the rights issue. But I still wasn’t fully sure where the shares would point in the market opening today,” Heikkila said. His fund owns about 0.3 percent of Outokumpu.

Thyssen shares dropped 9 percent.

“The deal as such was good, but the rights issue announcement also tells us that the (Outokumpu) management sees a worse 2014 than earlier anticipated,” Heikkila said.

Analysts raised their estimates,, with Pohjola Markets upgrading its rating to “hold” from “reduce” and Inderes Equity Research lifting its view to “accumulate” from “sell”.

The capital restructuring package was also seen as a success for Jorma Ollila, former Nokia CEO, who was elected this year as the chairman of Outokumpu’s board.

“The board must have been working intensively on this deal and Ollila might have been very hands-on,” Heikkila said.

Ollila has been widely accused in Finland of Nokia’s smartphone troubles that recently culminated in a sale of its entire mobile phone business to Microsoft. ($1 = 0.7345 euros) (Editing by Louise Ireland)

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