Finnish group Outokumpu will pay $3.6 million to acquire ThyssenKrupp's stainless steel unit Inoxum. Inoxum -- which the German group has been looking to sell since May last year -- will be merged with Outokumpu to form a new world leader in stainless steel.
In return, ThyssenKrupp receives a cash payment of 1.0 billion euros plus a stake of 29.9% in the new combined group.
The deal has been agreed in principle by the management boards of both companies and also got the go-ahead from labor representatives at the German group following "very difficult and tense" negotiations on job guarantees and the continuation of operations at the unit's different sites. The merger now needs the green light from the different regulatory authorities involved.
ThyssenKrupp -- the world's 14th biggest steelmaker and also a leading manufacturer of elevators, submarines and car parts -- announced in May that it planned to sell off its stainless steel activities as part of a massive 10-billion-euro divestment program.
In December, it sold civil shipbuilding activities Blohm + Voss to British investment fund Star Capital Partners for an undisclosed sum.
Inoxum has annual sales of more than six billion euros and employs more than 11,000 people worldwide. It was the cause of massive writedowns that pushed ThyssenKrupp as a whole deeply into the red in the 12 months to September.
The IG Metall labor union insisted that ThyssenKrupp was solely responsible for the "difficult economic situation of both the group as a whole and the stainless steel division. "We were not able to prevent ThyssenKrupp and Outokumpu from shutting down the Krefeld plant but we were able to secure guarantees for all employees," the union said.
Under the deal, all of Inoxum's German production sites will be maintained until the end of 2015.
A melting plant at Krefeld, western Germany, is to be gradually shut down by the end of 2013, while another at nearby Bochum will remain in operation until the end of 2016.
There would be no compulsory redundancies until the end of 2015, ThyssenKrupp said.
Outokumpu said that a total 850 jobs would be cut in Germany and the German group has offered to find jobs for up to 600 Inoxum employees elsewhere within the ThyssenKrupp group.
Michael Broeker, analyst at the Steubing brokerage house, said the tie-up would create the world's biggest maker of stainless steel with output of more than 5.0 million tons per year by around 2016. Asia has become a key competitor in this area with South Korea and Taiwan leading the way, the analyst said.
Outokumpu calculated that the deal would enable it to cut costs by up to 225-250 million euros a year by 2017.
Copyright Agence France-Presse, 2012
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