Thyssenkrupp raises $1.66 bn in share sale ahead of Tata Steel merger

26 Sep 2017

Thyssenkrupp AG, the Germany-headquartered steel maker, raised almost €1.4 billion ($1.66 billion) from institutional investors on Monday in a share sale to bolster its balance sheet ahead of a planned merger with the European operations of India's Tata Steel.

The two firms agreed last week to combine their European steel operations in a move to create the continent's second-largest steelmaker with revenues of about €15 billion.

Thyssenkrupp issued 56,593,794 new no-par-value bearer shares to obtain ''the financial leeway to support organic growth'' in its industrial goods business, the Essen-based steelmaker said.

At a price of €24.3, below Monday's closing price of €24.7, the share sale raised €1.38 billion, the company said.

With the new Thyssenkrupp-Tata Steel joint venture not expected to start operations until late 2018, it will take ''some time'' for the positive effects of the transaction to filter through, chief executive officer Heinrich Hiesinger said.

''We will use that time to strengthen our industrial goods businesses right away,'' he said.

Tata Steel and German steelmaker Thyssenkrupp AG have signed a memorandum of understanding (MoU) to create a joint venture, Thyssenkrupp Tata Steel, by combining the flat steel operations of the two companies in Europe and the steel mill services of Thyssenkrupp group.

The proposed 50:50 joint venture would have a turnover of about €15 billion (Rs115,000 crore) and currently employs about 48,000 people spread across various locations. The JV will be based in Amsterdam.

The JV will be formed through non-cash transaction, based on the valuation where both shareholders would contribute debt and liabilities to achieve an equal shareholding in the venture.

If approved, the new joint venture would create Europe's second-biggest steelmaker after ArcelorMittal, with combined sales of about €15 billion.