Outokumpu and Inoxum, the stainless steel unit of ThyssenKrupp AG, plan to combine under the operational leadership of Outokumpu.
Under the agreement to be put to Shareholders at an Extraordinary General meeting on 1 March, the Outokumpu Board of Directors will seek permission to undertake a directed share issue of 2200M shares in which Thyssen Krupp AG will be entitled to subscribe for 29.9% of the new shares in a transaction valued at €2.7bn.
The combined entity is expected to have the financial strength to take advantage of opportunities in the Americas and Asia which they believe offer great growth potential.
The two companies say they are highly complementary in terms of product range and customer segments so the resulting whole is designed to be greater than the sum of its parts. They will have a broad offering of high value added specialty products and a strong, expansive global distribution and service network, say Outukumpu. All these factors are expected to contribute to great synergies for the combined entity. The main elements that are expected to drive the cost synergy benefits are:
• Closure of the Krefeld meltshop by end of 2013 and envisaged closure of the meltshop in Bochum by the end of 2016. Both are located in Germany.
• Planned increase in capacity utilisation through reallocation of production to Tornio in Finland and Terni in Italy.
• Planned reduction of cold rolling capacity in Sweden from 2014 onwards.
• Optimisation of procurement operations and raw materials sourcing and general administration costs.
• Optimisation of the sales and service centre network in Europe.
Outokumpu say that the planned changes in Germany are sufficient in terms of melting capacity reduction. Outokumpu, ThyssenKrupp and the German labour representatives have reached an agreement over the production facilities and employment protection in Germany. Some 600 workers in Germany will be redeployed to other ThyssenKrupp plants.
At the close of 2011, the headcount in Outokumpu was about 8100 and at Inoxum around 11500.
The merger is dependent on approval by the Antitrust authorities which the two parent companies expect to be granted on the grounds of the changed global competitive conditions, the companies complementary product offerings, and the important synergies and consumer benefits that will result. Approval is expected by Q4 2012.
Outokumpu, headquarted in Finland, has melting facilities in Tornio, Finland, Avesta in Sweden and Sheffield in England as well as strip, tube, bar and wire processing plants in these countries and in Canada and USA.
ThyssenKrupp Inoxum has melting facilities at Krefeld and Bochum in Germany, Terni in Italy and recently commissioned a new 900kt/y stainless plant in Alabama, USA.
Combined capacity of the merged plants will be in excess of 3Mt/y.