Final offers for ThyssenKrupp AG's (TKA.XE) massive steel plants
in Brazil and Alabama are well below the company's expectations as
the German conglomerate enters the final stretch of a long-awaited
sales process through which it hopes to end an investment that has
cost it billions of euros, two people familiar with the transaction
told Dow Jones Newswires Tuesday.
A deal could be announced as early as April, but will likely
trigger a further write-down of about $1.3 billion for ThyssenKrupp
because the bids are considerably below the current $5 billion book
value of the works, these people said.
While the Brazilian steelmaker Cia. Siderurgica Nacional
(CSNA3.BR) has put down a final bid of about $3.8 billion for both
plants--roughly in line with a preliminary bid dating back to late
last year--a joint venture of ArcelorMittal (MT) and Nippon Steel
& Sumitomo Metal Corp. (5401.TO) has offered a binding bid of
about $2 billion for the Alabama plant, these people say.
Since 2010, ThyssenKrupp has posted over $15 billion in losses
related to its Americas operation, which encompasses the two
plants. Last May, it said it was selling these to slash its
mounting debt burden.
CSN and the group comprising ArcelorMittal, Nippon Steel and
Sumitomo Metal are the suitors are most likely to win the tender
process for the Brazil-based steel slab plant and the processing
mill in Alabama, people working on the deal previously told The
Wall Street Journal. An ArcelorMittal spokesperson wasn't
immediately available to comment but ArcelorMittal's Chief
Financial Officer Aditya Mittal said March 15 that the company is
still interested in ThyssenKrupp's Alabama plant and this year
issued new shares and a convertible bond to help finance a
deal.
Brazilian state development bank BNDES could offer up to 4
billion reais ($2.01 billion) in financing to support CSN's bid for
ThyssenKrupp steel operations in the Americas, Brazilian newspaper
Valor Economico reported last week, citing sources. Spokespeople
for CSN and BNDES declined to comment.
The level of bids indicates that the German industrial
conglomerate faces a fresh round of substantial impairments on its
Steel Americas unit. A sale well below book value could also
trigger the need for a capital increase for the highly indebted
company, bankers said. Earlier Tuesday, German daily newspaper
Handelsblatt said the company is considering a capital increase of
more than 1 billion euros ($1.29 billion).
Analyst Rochus Brauneiser from Kepler Capital Markets said
ThyssenKrupp's biggest concern is a weak equity cushion. Thyssen at
the end of December posted an equity ratio, which it defines as
total equity to balance sheet, of 11.4%. Potential further asset
impairments in connection with the Steel Americas sale may further
weaken the company's equity, he said.
ThyssenKrupp in December said it had to write down the value of
the two overseas steel plants by EUR3.6 billion in its fiscal
fourth quarter ending Sept. 30. The impairment charges were the
main reason for a hefty EUR4.7 billion net loss in fiscal 2012,
which in turn prompted ThyssenKrupp to shore up a depleted balance
sheet by withholding its dividend for the first time since the
merger between Thyssen and Krupp about 13 years ago.
Other suitors for the unit includes Argentina's Ternium SA (TX),
which placed a relatively low offer for ThyssenKrupp's 73% stake in
the Brazilian plant, according to two people familiar with the
deal, and U.S.-based NuCor Corp. (NUE), which submitted a less
attractive offer for the Alabama site. The remaining suitors are
Japan's JFE Steel Corp. and U.S. Steel Corp., which are both eyeing
the Alabama plant. A spokesman for U.S. Steel declined to comment,
officials from NuCor and Ternium didn't immediately respond when
approached by Dow Jones Newswires, while Nippon Steel and JFE
couldn't immediately be reached for comment.
A spokesman for ThyssenKrupp declined to comment on the
information and said the group is continuing to consider both the
sale of the two plants together as a unit or separately to
different investors.
-- Jan Hromadko, Hendrik Varnholt and Sarah Sloat in Frankfurt,
Alex MacDonald in London, Matthew Day in Pittsburgh and Rogerio
Jelmayer in Sao Paulo contributed to the report.
Write to Eyk Henning at eyk.henning@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires