Swedish steelmaker SSAB AB is exploring a combination with Tata Steel Ltd.’s European business as a back-up plan to a deal with Thyssenkrupp AG amid industry consolidation, according to people familiar with the matter.
SSAB is holding preliminary talks with Tata Steel of India as it seeks merger options, the people said, asking not to be identified as the matter is private. The Swedish company, which has a market value of around 28 billion Swedish kronor ($3.2 billion), would gain control of Tata Steel’s European business if they pursued such a deal, they said.
Steel producers in Europe are under pressure to consolidate, having been battered by weaker demand and global overcapacity, combined with soaring prices of iron ore and high supply of low-cost imported steel. As a result, several major producers are speaking to each other about potential mergers.
SSAB is among steelmakers interested in acquiring steel assets from Thyssenkrupp, the German conglomerate that’s restructuring to ensure its survival. That is their preferred partner due to the strategic fit, two of the people said. But the Swedish pursuit was complicated last week by news that Sanjeev Gupta’s Liberty Steel had made a non-binding indicative offer for the German business.
Thyssenkrupp will carefully examine the offer, while continuing discussions with other potential partners, the company said in a statement last week. Representatives for SSAB, Tata Steel, Liberty Steel and Thyssenkrupp declined to comment when contacted on Thursday.
