ThyssenKrupp Is Stuck in Steel – by RENÉE SCHULTES (Wall Street Journal – December 2, 2013)

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It Isn’t Clear How Costly Retaining Some of Its Assets Recently Might Be Longer Term

For ThyssenKrupp, TKA.XE -2.32% it is hard to escape steel. Shares in the loss-making German conglomerate dropped 8.5% Monday after it said it would raise up to a 10th of its market value in fresh equity, equivalent to about €900 million ($1.22 billion).

ThyssenKrupp’s more than decadelong project to shift its focus from volatile steelmaking to producing finished goods such as elevators has run into trouble. The company this weekend announced the sale of its U.S. steel mill but was forced to retain Brazilian mill CSA. Separately, a deal with troubled Finnish steelmaker Outokumpu OUT1V.HE -6.51% means ThyssenKrupp takes back two European assets it sold only a year ago.

Investors can hardly feel galvanized to buy in.

ThyssenKrupp had few alternatives. Selling its Americas business would have drawn a line under a misplaced attempt to make steel cheaply in Rio de Janeiro and ship it to the U.S. for processing, a strategy undone by rising production costs in Brazil. But CSA’s onerous supply contract with iron-ore miner Vale made potential buyers wary. So ThyssenKrupp had to settle for selling its three-year-old mill in Alabama, accepting $1.55 billion when analysts had thought it worth closer to $2 billion.

Its Finnish deal looks far from ideal, too. ThyssenKrupp has swapped a €1.25 billion loan to Outokumpu for alloy unit VDM and Italian stainless-steel mill Terni, effectively reversing part of a 2012 deal. Meanwhile, selling its 29.9% stake in Outokumpu stops ThyssenKrupp from being drawn into the Finnish group’s capital raising. That saves shelling out up to €500 million but is strategically a step backward.

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