Liberty Steel Group has made a non-binding bid to acquire thyssenkrupp Steel. Discussions are ongoing.
Assets have been in play for some time
This move follows a long period of time where thyssenkrupp’s steel business has been in play. The proposed joint venture with Tata Steel Europe floundered on competition remedies that were judged too large to leave the JV as an attractive proposition for either party. More recently there has been speculation about future ownership options for thyssenkrupp, including a combination with SSAB (also see an earlier subscriber Insight here).
Liberty is obviously a company that has been growing rapidly by M&A and not just in steel, with recent acquisitions across aluminium and ferroalloys, for example. As such it is perhaps not surprising that it is now approaching an asset that is in play.
Some key thoughts… more online for subscribers
Strategic convergence exists in low-CO2 steelmaking
A core strategy of Liberty’s is what it calls the Greensteel model, i.e. leverage of renewable power assets to produce low-CO2 steel products in EAFs. Thyssenkrupp is today a wholly blast furnace-based business, though it is one that is moving towards a lower carbon footprint.
Target markets and company cultures are different
The two companies are not focused on the same core market sectors. Thyssenkrupp is very exposed to automotive and has invested heavily over a long time in the capability to deliver excellence to this demanding customer group. Liberty has grown from trading roots, does not have a history of supply to the automotive sector and its assets have tended towards serving the commodity end of the market. The two company cultures are quite different, with thyssenkrupp focused on engineering and technical excellence and long-term relationships, and Liberty more opportunistic, decentralised and fast-moving.
Competition considerations do not look insurmountable
The volume combination of the two does not look to present any insurmountable challenges from a competition perspective. Some remedy asset sales might be required but if so, it is hard to see them being material enough to render the combination unattractive.
