November 15, 2012 / 1:20 PM / 7 years ago

Dealtalk: Top names drop off list of Thyssen Americas bidders

FRANKFURT (Reuters) - Several top steelmakers are sitting out ThyssenKrupp’s (TKAG.DE) auction of its U.S. and Brazilian mills and there appears little interest in the latter, suggesting the German firm may fall well short of its $9 billion asking price.

With second-round offers due on Thursday, the field of bidders for the loss-making mills is down to around half a dozen, two people close to the process said.

U.S. Steel (X.N) and rival Nucor (NUE.N) are still in the running, as are Japanese groups JFE Steel Corp (5411.T) and Nippon Steel (5401.T), and Brazil’s CSN SCNA3.SA, the people said, adding final bids were due next month.

However, South Korea’s POSCO (005490.KS), China’s Baosteel (600019.SS) and Brazilian iron ore miner Vale VALE5.SA, which owns just over a quarter of ThyssenKrupp’s Brazilian plant, are not bidding. It was not clear whether ArcelorMittal ISPA.AS, the world’s biggest steelmaker, was still in the running.

ThyssenKrupp said in May it was considering all options for the steel mills, including a partnership or a sale, to halt losses there and concentrate on its European business.

Chief Executive Heinrich Hiesinger has said he would want to sell the mills separately for at least their combined book value of 7 billion euros ($9 billion). But analysts’ hopes are fading.

“Those looking for ‘the number’ ($9 billion) may well be disappointed,” Credit Suisse analysts said in a recent research note, though they added a price around $4-5 billion would still be a good result and strengthen ThyssenKrupp’s finances.

Another analyst, who declined to be named, said most of the remaining bidders were only likely to be interested in the U.S. mill in Alabama, which offers exposure to a huge market via state-of-the-art flat-rolled steel production.

“That (the list of second-round bidders) seems to imply that CSN is the only bidder left for the Brazilian plant,” he said.

While that plant, outside Rio de Janeiro, offers a way to reduce dependence on slab-producing suppliers, it has been fined for air pollution violations and could face closure due to recurring environmental problems.

Analysts also think any buyer would have to be Brazilian because of government pressure to have a domestic owner and because high operating costs would make it harder for companies to make money that do not already have slab rolling and processing capacity in the country.

ThyssenKrupp, ArcelorMittal, U.S. Steel, Nucor, Nippon, JFE and CSN all declined to comment.


Sources told Reuters last month that ThyssenKrupp asked bidders to resubmit their offers because it deemed the initial bids too low.

Analysts have said that ArcelorMittal, which is struggling to cut debt and has been downgraded by credit rating agencies Moody’s and S&P to “junk” status, could yet want to buy the U.S. plant, if only because it would keep out a rival who could start a price war in the lucrative market supplying the auto sector.

“Clearly we are a player in the Americas, we are the largest steel company in the world. It is something we need to take a close look at,” finance chief Aditya Mittal said last month.

U.S.-based AK Steel Holding Corp (AKS.N) has also said it might be interested in the two steel mills.

The plants were meant to give ThyssenKrupp a foothold in the Americas, but the mills have struggled with rising costs and sluggish demand.

Steel Americas, the division that includes both sites, posted an adjusted loss before interest and tax of 778 million euros for the nine months to the end of June and is reportedly heading for a full-year loss of more than 1 billion euros.

ThyssenKrupp may have to woo suitors with perks such as cooperations and guarantees to purchase a certain amount of steel, but so far no such offers are on the table, one of the sources said.

He also said no bidding consortia had been set up so far, though that could still happen in the last phase of the process.

ThyssenKrupp, which is being advised on its review of Steel Americas by Goldman Sachs (GS.N) and Morgan Stanley (MS.N), is due to publish results for the year ending September on December 11.

($1 = 0.7867 euros)

Additional reporting by Maria Sheahan, Phil Blenkinsop, Swetha Gopinath, Guillermo Parra-Bernal, Yuko Inoue; Writing by Maria Sheahan; Editing by Mark Potter

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