Steel giant Thyssen fights takeover bid

German merger battle: Unions fear pounds 2.6bn deal instigated by small er rival Krupp-Hoesch would lead to heavy job cuts

The German steelmaker Krupp-Hoesch yesterday launched a hostile pounds 2.6bn bid for its larger rival Thyssen in a move which would create Europe's biggest steelmaker and spark off a fresh round of rationalisation and savage job-cutting.

The combined group would have sales of pounds 24bn and crude steel production of 18.1 million tonnes, making it the third- largest steelmaker in the world and eclipsing British Steel as Europe's number one producer.

But German steel unions fear that the takeover, masterminded by the controversial Krupp-Hoesch chairman, Gerhard Cromme, will merely prove the prelude to heavy job cuts with at least 10,000 of the 110,000-strong Thyssen workforce under threat.

"We will not just sit back and let this happen to us. Basically this is undiluted capitalism, pure Wild West methods," said Willy Siegerer, the deputy head of the Thyssen works council.

However, other steel makers gave a guarded welcome to news of the bid, suggesting it could ease the continuing problem of overcapacity that has held prices down and wrought so much damage on the European steel industry.

British Steel said: "Anything which could lead to a reduction in capacity in Europe would be fairly positive."

The UK Steel Association also gave cautious backing. Ian Rodgers, its director of policy, said: "Germany has been the one member state where there is a need for more rationalisation. If the intention of this bid is to help achieve rationalisation then that can only help the situation in Europe generally."

Steelmaking capacity within the European Union is 203 million tonnes compared with actual crude steel production last year of 148 million tonnes. An attempt by the European Commission four years ago to broker a big reduction in capacity in return for approving further state aid for the steel industry resulted in fewer than 10 million tonnes of capacity being removed.

Hostile bids are virtually unheard-of in Germany, making yesterday's move by Krupp-Hoesch, in which the Iranian government has a 25 per cent stake, highly unusual. However, it is consistent with Mr Cromme's track record. He created Krupp-Hoesch in 1991 by engineering Fried Krupp's hostile takeover of Hoesch with the loss of 20,000 jobs.

Union members from both companies surrounded Krupp-Hoesch's head office in Essen yesterday, shouting to Mr Cromme to address them. Mr Cromme, known in the industry as "the job-killer", hid behind bullet-proof glass and shouted back.

Reports of 30,000 job losses in the steel industry after a takeover of Thyssen were "pure panic-mongering," he told the protesters. There was, he assured them, no plan to close any plants, though the merged company would try to streamline production. The workers responded at one point by trying to storm the building and then pelting it with eggs.

Krupp-Hoesch is offering DM435 per share, a 25 per cent increase on the final price reached before shares in both companies were suspended in Frankfurt. Thyssen shares jumped to DM410 in unofficial trading after the announcement.

Krupp-Hoesch employs 66,000 people, and in the year to December reported a net profit of DM208m on sales of DM24bn. For the year to September Thyssen reported a net profit of DM350m on sales of DM38.7bn. It had a market value of just under DM12bn before the shares were suspended.

Krupp-Hoesch said the planned merger was in response to intense global competition. In order to stay competitive, German industry had to cut its costs of production, logistics and distribution.

"It is indispensable to achieve sufficient size in business in accordance with global standards," Krupp-Hoesch said in a statement.

Analysts say that synergies between the two companies in flat steel products and automotive pressings would make the merger attractive and could pave the way for the cost cuts needed to improve Germany's competitiveness against other European steel makers. A tonne of crude steel produced by Thyssen costs DM160, compared with DM155 in France and DM120 by British Steel.

For that reason, the bid is not likely to be opposed by the German authorities, but it will have to be approved by the European Commission.

How British Steel measures up

British Steel Krupp-Thyssen

Turnover pounds 7bn pounds 24bn

Pre-tax profits pounds 1.1bn pounds 210m Employees 54,000 195,000

Production costs pounds 45 pounds 60

(per tonne)

World's top steel producers

Company Output (millions tonnes)

1 Nippon Steel 27.8 2 Posco 23.4 3 Krupp-Thyssen 18.1

4 British Steel 15.6 5 Usinor Sacilor 15.5 6 US Steel 12.1 7 NKK 12.0

8 Arbed 11.5 9 Kawasaki 11.1 10 Sumitomo 10.5

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Voices
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
News
i100
Arts and Entertainment
Jay Z has placed a bet on streaming being the future for music and videos
music
Arts and Entertainment
Festival-goers soak up the atmosphere at Glastonbury
music
News
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
news
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own