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Capital market-relevant press releases, 2000-08-16, 02:00 AM

ThyssenKrupp Steel September IPO canceled. Low stock market valuation despite very good business performance. (Press release)

ThyssenKrupp, together with consortium lead managers Deutsche Bank and Commerzbank, has reached the conclusion that the flotation of ThyssenKrupp Steel planned for September should not go ahead in view of the stock market’s current weak valuation of the steel sector. Against this background the Executive Board of ThyssenKrupp AG has decided to cancel the IPO for September 2000.

This is all the more regrettable because the Steel group is performing very well. In deciding on the IPO in November 1999 the Executive Board and Supervisory Board assumed on the basis of the capital market situation at the time that by floating 25 to 35% of the shares proceeds of at least DM3 billion would be achieved. ThyssenKrupp - in line with steel sector forecasts - had anticipated a more favorable capital market climate and expected that given the good performance of ThyssenKrupp Steel it would achieve an above-average valuation in comparison with competitors.

Share prices in the steel sector have now reached a level which in ThyssenKrupp’s view no longer reflects the true value of the steel stocks – and thus of the ThyssenKrupp Steel shares earmarked for the flotation. Steel stocks are currently trading well below their equity value, and on top of this there is a relatively high IPO discount on account of the negative valuation of the steel sector.

The capital market is not willing at present to pay the expected premium for ThyssenKrupp Steel. The capital market is not taking into account the fact that ThyssenKrupp Steel has major cost reduction potential of Euro400 million per year through the realization of synergies and through further rationalization and improvement measures. In addition, ThyssenKrupp Steel will benefit to an above-average extent from the long-term growth rates of 4% for carbon steel and 7% for stainless. Against this background ThyssenKrupp Steel will be able to achieve a high level of earnings in the future and to make clear profits even during cyclical lows.

This divergence between rising earnings coupled with good market positions at ThyssenKrupp Steel on the one hand and the stock market’s low valuation of steel companies in general on the other is the reason for the cancellation of the flotation of Thyssen Krupp Steel AG. Given the current weak valuation of the steel sector a limit has been reached which would make it impossible to achieve the goal of creating added value for the Group. The strategic advantages of the IPO for ThyssenKrupp do not justify accepting the disadvantages currently associated with it.

The business performance of ThyssenKrupp Steel is extremely positive. In the 3rd quarter of the current fiscal year alone, ThyssenKrupp Steel generated pre-tax income of around Euro200 million. This means that Steel generated more in the 3rd quarter of 1999/2000 than in the entire first half (Euro183 million). For the 4th quarter (July to September) of the current fiscal year a very good profit is again expected despite the vacation period.

The reasons for these very encouraging earnings are the positive revenue trend, increasing shipments in both Flat Carbon Steel and Stainless, and the systematic realization of the restructuring measures. ThyssenKrupp Steel believes it will be able to raise earnings further in the coming fiscal year.

ThyssenKrupp will continue to aggressively pursue the goal of generating high added value within the framework of its strategic realignment. This continues to mean focusing on core businesses through continuous portfolio optimization and steadily expanding these core businesses, which are characterized by continuous growth and leading market positions.

The ThyssenKrupp Group has succeeded in further strengthening its earning power. Income in the current fiscal year will be well above the figure for the previous year. An appropriate dividend will once again be paid out. From the present perspective a further improvement in earnings is expected in the next fiscal year.

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