Negotiations aimed at transferring Thyssenkrupp's steel arm to Jindal Steel International risk being halted after prolonged discussions failed to bridge differences on pensions, investment commitments and the impact of rising energy costs, four people familiar with the matter said.
Those people cautioned that while conversations over the sale of Thyssenkrupp Steel Europe - commonly referred to as TKSE - have continued and could still reach an agreement, a successful deal is now seen as less likely after nearly six months of due diligence and detailed exchanges between the parties.
One source said the companies could formally decide to end negotiations as soon as next month. The hesitancy follows repeated efforts by Thyssenkrupp to find a long-term solution for its cyclical, high-cost steel business; past approaches have ranged from public listings and spinoffs to joint ventures and outright sales.
The persistence of TKSE on Thyssenkrupp's agenda reflects its strategic importance to the group and to Miguel Lopez's broader plan to restructure the storied German engineering company into a holding entity by divesting stakes in its various business divisions, which span car parts to clean technology. Failure to secure a buyer for TKSE would represent a setback for that strategy.
Among the specific obstacles complicating talks is a 2.4 billion euro pension obligation associated with TKSE, a burden that has repeatedly complicated prior sale efforts. Parties have also differed on how much future capital investment the steel unit will require, with no consensus reached during due diligence, the people said.
Rising energy costs in Europe have added to Jindal Steel International's unease about the deal, a second source said. Energy prices in the region were already higher than in the United States and Asia, and those costs have climbed further in the wake of the Iran war, according to the same person.
Thyssenkrupp said on Wednesday that confidential talks with Jindal Steel International and labour representatives were continuing, and reiterated that matters of valuation, obligations and future investments would need to be agreed between the parties.
Jindal Steel International, the international steel arm of the Naveen Jindal Group, did not provide an immediate comment when contacted.
Company leadership has signalled contingency plans. Earlier this month, Miguel Lopez stated the group would persist with restructuring of TKSE "with or without Jindal." At the same time, Thyssenkrupp's deputy supervisory board chairman, Juergen Kerner, said last week that talks had stalled.
Lopez has also pointed to planned European Union measures intended to support the bloc's underperforming steel sector as a factor that increased investor interest and strengthened the company's hand in negotiations.
Jindal Steel International made an indicative proposal for TKSE in September. That offer envisaged the completion of a green steel production site in Duisburg along with a commitment exceeding 2 billion euros to add further electric arc furnace capacity.
In published coverage of the discussions, a currency conversion figure was noted: $1 = 0.8622 euro.
Summary of current status
- Talks remain confidential and ongoing, but the probability of a deal has diminished after nearly six months of due diligence.
- Key unresolved items include 2.4 billion euros of pension liabilities, disagreement over required future investment, and concerns at Jindal about rising European energy costs.
- Thyssenkrupp retains contingency plans to continue TKSE restructuring independently of a transaction.