by Renee Cordes | Published January 23, 2012 at 8:09 AM
Germany's ThyssenKrupp AG said Monday, Jan. 23, that it is discussing merging its Inoxum stainless unit with Finland's Outokumpu Oyj.
ThyssenKrupp added that its board was working "intensively'" on carving out Inoxum, and was considering an initial public offering and a spinoff, as well as a trade sale.
"Making Inoxum independent is an important step for the strategic development of ThyssenKrupp, to make the company competitive and sustainable for the future," Thyssen said.
Thyssen, Germany's largest steelmaker, also reiterated a May 2011 pledge to split off Inoxum within 12 to 18 months. It declined to reveal details of the discussions with Finland's largest stainless steel producer. Helsinki-based Outokumpu confirmed the discussions in a brief statement.
Germany's Rheinische Post newspaper had earlier reported that ThyssenKrrupp plans to retain a minority stake in the combined entity, which would have a total of 18,000 employees and €10 billion ($12.3 billion) in sales.
Investors cheered the news, pushing ThyssenKrupp shares up more than 2.8% to €21.275 in Frankfurt. Outokumpu shares advanced 11.3% to €7.49 in Helsinki.
Last month ThyssenKrupp posted a €2.9 billion fiscal full-year loss, mainly because of write-downs at Inoxum and Steel Americas.
In a research note ahead of the announcement, analyst Stefan Fredenreich of Equinet Bank AG in Frankfurt noted that the combination would make strategic sense, allowing Outokumpu to benefit from Inoxum's strong distribution network in Europe.
He noted that Outokumpu has a strong exposure to and technical knowledge of ferritic stainless grades. These are less pressured by Asian imports and less affected by volatile pricing since they don't contain nickel.