Sanjeev Gupta’s GFG Alliance and, in particular, its steel and aluminum subsidiary Liberty Steel, is rarely out of the news, it seems.
The firm’s insatiable appetite for bankrupt or struggling metals assets has the market split. One the one hand, boosters are cheering its entrepreneurial spirit. On the other, naysayers are questioning the opaque funding structure and apparently high levels of expensive debt underpinning what they see as a potential house of cards.
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Liberty Steel eyes Thyssenkrupp’s steel business
We are more interested in the implications for the steel market.
Liberty’s latest foray into acquisitions would create a potentially disruptive behemoth in a crowded European market. That market is facing intense foreign competition and declining demand as a result of a pandemic-induced slowdown in manufacturing.
That Thyssenkrupp is desperate to sell its loss-making steel business is not new news.
The steel division has been a major drag on the group. According to the Financial Times, the group is likely lose €1 billion ($855 million) this year.
This year, Thyssenkrupp sold its elevator business for $17 billion in an effort to shore up its finances. The firm has been in talks with other steelmakers, including Sweden’s SSAB and India’s Tata, the Financial Times reported.
So far, however, Thyssenkrupp hasn’t found a buyer that would pass competitions scrutiny.
Which raises the question: will Liberty?
Liberty runs plants and mines across North America, Australia, and India. The firm has global revenues of $15 billion and a workforce of 30,000.
Thyssenkrupp’s beleaguered Steel Europe unit generates sales of approximately €9 billion with 27,000 employees. Together, the firms would become the second-largest steelmaker in Europe, behind only ArcelorMittal.
Logic says in a market suffering poor capacity utilization, rationalization would be one recipe for turning the group around. However, unions and state governments are likely to fiercely resist widespread redundancies.
The German union IG Metall has held demonstrations to oppose job losses and demand government bailouts. Brussels previously denied a Thyssen-Tata merger over fears it would reduce competition. As such, it remains to be seen how it will view a Liberty-Thyssen takeover.