COPENHAGEN (Reuters) - Denmark’s FLSmidth on Thursday said it had agreed to buy Thyssenkrupp’s mining equipment division in a deal valuing the unit at 325 million euros ($386 million), sending its shares down more than 7%.
Analysts cited concerns over larger-than-expected losses at the unit as behind the slump in FLSmidth shares after the deal was announced.
Thyssenkrupp’s mining business, which competes with Sweden’s Sandvik and Atlas Copco and Finland’s Metso Outotec, delivered a high single-digit negative operating margin in 2020 and is only expected to return to profitability by 2024, FLSmidth said.
“They’re buying a business which has negative earnings, and you can question if they will be able to deliver on these synergies. If they can’t, then the price is too high,” said Sydbank analyst Mikkel Emil Jensen.
Reuters had reported on Wednesday that a deal could be announced this week.
The transaction ascribes an enterprise value of 325 million euros on the business, FLSmidth said in a statement.
Credit Suisse in a note this week outlined concerns over the deal, saying Thyssenkrupp’s mining unit had overlooked opportunities for years “with no focus on designing equipment for service ... and no dedicated service sales people”.
Shares in Thyssenkrupp reacted positively on the news, and rose around 2%,
($1 = 0.8422 euros)
Reporting by Stine Jacobsen and Christoph Steitz; Editing by Jason Neely and Jan Harvey
Our Standards: The Thomson Reuters Trust Principles.