FRANKFURT/NEW DELHI, March 25 (Reuters) - Discussions of a possible sale of Thyssenkrupp's steel unit to Jindal Steel International could be called off due to differences over pension liabilities,
Thyssenkrupp, Jindal steel sale talks falter on pension, energy costs, sources say
Overview of Thyssenkrupp and Jindal Steel Sale Negotiations
By Christoph Steitz and Neha Arora
FRANKFURT/NEW DELHI, March 25 (Reuters) - Discussions of a possible sale of Thyssenkrupp's steel unit to Jindal Steel International could be called off due to differences over pension liabilities, investments and energy costs, four people familiar with the matter said.
While talks over a sale of Thyssenkrupp Steel Europe (TKSE) are ongoing and could still result in an agreement, a deal is now seen as less likely after nearly six months of due diligence and discussions, the people said.
The companies could decide to officially stop negotiations as soon as next month, one of the people said.
Shares in Thyssenkrupp fell 4% following the Reuters report.
Background of Thyssenkrupp Steel Europe Sale Attempts
Thyssenkrupp has tried to sell TKSE several times in the past decades, pursuing everything from listings to spinoffs and joint ventures to outright sales of the cyclical high-cost business.
Stalled TKSE Sale Threatens Thyssenkrupp Divestment Strategy
STALLED TKSE SALE THREATENS THYSSENKRUPP DIVESTMENT STRATEGY
Failure to sell TKSE would be a setback for Thyssenkrupp CEO Miguel Lopez's plan to turn the storied German engineering group into a holding by divesting stakes in all of its business divisions ranging from car parts to clean-tech.
Impact of Production Cuts and Job Risks
Thyssenkrupp announced on Thursday that it will extend production cuts at its sites in Isbergues in France. It said production would be shut down completely from June to September, putting 1,200 jobs at risk in Germany and France.
Key Issues in Negotiations
Pension Liabilities and Investment Disagreements
Among the factors complicating talks are 2.4 billion euros ($2.8 billion) of pension liabilities tied to TKSE - a hurdle in past sales efforts - as well as differing ideas over how much future investment is needed, the people said.
Rising Energy Costs
In addition, there has been growing unease at Jindal Steel International over rising energy costs in Europe, the second source said. Energy costs in Europe were already higher than in the United States and Asia, and they have soared further as a result of the Iran war.
Statements from Parties Involved
Thyssenkrupp's Position
Thyssenkrupp said on Wednesday confidential talks with Jindal Steel International and labour representatives continued, adding that matters of valuation, obligations and future investments would need to be agreed between the parties.
Jindal Steel International's Response
Jindal Steel International, the international steel arm of the Naveen Jindal Group, had no immediate comment.
Comments from Leadership
Earlier this month, Lopez said the group would continue with TKSE's restructuring "with or without Jindal," while Thyssenkrupp's deputy supervisory board chairman, Juergen Kerner, last week said talks had stalled.
Lopez has also said that planned EU measures to protect the bloc's underperforming steel sector had boosted investor sentiment and strengthened Thyssenkrupp's position in negotiations.
Details of Jindal Steel International's Offer
Jindal Steel International in September made an indicative offer for TKSE that includes the completion of a green steel production site in Duisburg and a more than 2-billion-euro ($2.31 billion) commitment to establish additional electric arc furnace capacity.
Exchange Rate Information
($1 = 0.8622 euro)
Reporting Credits
(Reporting by Christoph Steitz in Frankfurt and Neha Arora in New Delhi;Editing by Matthew Lewis and Joe Bavier)
