Outokumpu (OMX:OUT1V) confirmed that it has reached an agreement with ThyssenKrupp to combine the German conglomerate’s stainless steel unit with Outokumpu. The transaction values Inoxum at 2.7 billion Euros, comprising of a 1 billion Euro cash payment and new shares in Outokumpu totaling 29.9% of total share capital. In addition to this Outokumpu will issue a 235 million Euro loan to ThyssenKrupp and will assume 422 million Euros of liabilities from it.
The companies gave significant concessions to workers union. Bochum melt shop will stay in operation until the end of 2016 and there will be no compulsory redundancies in Germany until the end of 2015. Krefeld meltshop will be closed before the end of 2013. Out of the total job cuts of 850 in Germany, ThyssenKrupp will offer alternative jobs to up to 600 people.
Outokumpu expects nearly 250 million annual synergies by 2017 after the agreement with the workers union IG Metall seizes to hinder cost cutting measures. The deal is subject to Outokumpu’s Board approval later today and regulatory approvals. The speculation from yesterday was pretty much spot on. Outokumpu plans to conduct a 1 billion Euro fully underwritten rights offering in connection with the transaction.
This morning Outokumpu opened up around 5% over 7.7 Euro but in the five minutes that the stock remained open for trading it managed to slump as low as 6.6 Euro and ended up in the middle of that range on a massive volume as Outokumpu requested for a trading halt. The share will reopen in few minutes time and the initial reaction seems to be a major disappointment in the concessions made and the hefty cash payment.
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