Emirates Steel Arkan considering options after report on Thyssenkrupp stake bid

The Abu Dhabi business is pursuing a potential investment in the German conglomerate’s steel unit, according to a report

The Thyssenkrupp headquarters in Essen, Germany. Emirates Steel Arkan is emerging as the most serious contender to buy a stake in the German company's steel business, according to a report. Reuters

Emirates Steel Arkan, the largest public steel and building materials business in the UAE, said it continuously evaluates options to expand its business after a media report earlier this week said the Abu Dhabi state-backed group is pursuing a potential investment in Germany’s Thyssenkrupp’s steel unit.

Emirates Steel Arkan is emerging as the most serious contender to buy a stake in the Thyssenkrupp business and could make a formal bid in the coming months, Bloomberg reported on Wednesday, citing sources.

“We are aware of the media reports that have been published in the last 48 hours,” Saeed Al Remeithi, group chief executive of Emirates Steel Arkan, said in a statement on Friday to the Abu Dhabi Securities Exchange, where its shares are traded.

“However, the relevant discussions are at a very preliminary stage and no terms in respect of any potential transaction have been reached. Any material information relating to a transaction will be announced in compliance with applicable regulations and disclosure requirements.”

The UAE created Emirates Steel Arkan in 2021 when sovereign wealth fund ADQ combined Emirates Steel Industries with Arkan Building Materials.

The company has supplied construction projects including Dubai’s Burj Khalifa and Emirates Palace, according to its website.

Global steel demand is expected to grow 2.3 per cent this year and 1.7 per cent in 2024, according to a forecast by the World Steel Association. Manufacturing is expected to lead the recovery, but high interest rates will continue to weigh on steel demand, the report said.

Emirates Steel Arkan could take a minority stake in Thyssenkrupp Steel as part of a business partnership, the Bloomberg report said, citing sources.

The Middle Eastern company would produce energy-intensive products in the UAE using renewable power before shipping them to Germany, where Thyssenkrupp could shape them into finished products for the automotive industry, according to those sources.

“We have an ambitious growth strategy to capture the emerging opportunities in sustainable, low-emission steel products over the next five to 10 years, which we will explore with various partners for the benefit of our current and future customers around the world,” Emirates Steel Arkan said in the statement to the ADX.

India’s JSW Steel and buyout firm CVC Capital Partners have also expressed interest in the Thyssenkrupp steel unit in recent months, though discussions with those suitors aren’t currently as active, according to Bloomberg.

Thyssenkrupp’s European steel unit reported revenue of about $13 billion last year — roughly a quarter of the company’s overall sales, the report said.

The German conglomerate’s incoming chief executive Miguel Borrego will be tasked with offloading the steel business when he starts on June 1.

Mr Borrego is currently head of German industrial supplier Norma Group.

Earlier this year, the German-born Spaniard spurned takeover bids from private equity company Carlyle Group, which offered to buy Norma at a substantial premium, Bloomberg said.

Established in 1998, Emirates Steel Arkan supplies domestic and international markets with products such as wire rods, rebar, heavy sections and sheet piles.

The company reported a significant rise in its fourth-quarter net profit to Dh125 million ($34 million) as cost efficiencies and higher sales drove income. Revenue stood at Dh2.3 billion.

Full-year net profit for 2022 rose to Dh508.45 million. Revenue for the 12 months ended December rose 10 per cent to Dh9.5 billion in 2022, from Dh8.6 billion in the previous year.

The company attributed the turnaround in profit to strong international demand and the steps taken by the group to enhance operational efficiencies following the merger.

The group grew its international export footprint by 25 per cent to 70 countries last year, from 56 in 2021.