Bids reportedly on the table for US Steel’s Slovak unit

Bids reportedly on the table for US Steel’s Slovak unit
By bne IntelliNews December 6, 2016

Two major bids have been lodged for US Steel Kosice, one of Slovakia’s biggest employers and the focus of government anger over what it sees as a lack of responsibility from foreign investors, local media reported on December 5.

Speculation that the plant is up for grabs has never really died out over the past few years, but the story took on new life in recent months as Russian and Chinese suitors were reported to be sniffing about. Information on any potential deal has remained limited, however, with the government keen to try to control the situation at a plant that employs 10,000 workers in one of Slovakia’s unemployment blackspots in the east of the country.

Several local publications claimed on December 5 that bids were lodged three days earlier at the US owner’s HQ in Pittsburgh. The suitors are reported to be Czech-Slovak group Moravia Steel – which has long been speculated to be interested – and Chinese steel giant Hesteel Group, reports TASR. However, neither the government nor US Steel would comment.

The economy ministry would only state that it is watching closely the situation closely amid media reports that major investors have presented bids to the American owner. While the plant is in the hands of a private company, it is an important part of the national economy, noted spokesman Maros Stano.

The ministry “doesn't have any information concerning a sale. Similar reports in the past weren't confirmed in the end," he added.

"I still refrain from commenting on rumours," said a spokesman for US Steel Kosice.

Pushing through tough global markets, US Steel Kosice turned to a €17mn profit last year from a €369mn loss a year before. The company has, however, been involved in several hot-tempered negotiations with the Slovak government in recent years. Bratislava insists the investor has a responsibility to the struggling region in which it sits.

Slovak Prime Minister Robert Fico has illustrated in the past just how strategic he considers the plant. In 2013, his government stepped in at the 11th hour as it fought US Steel plans to either implement severe cutbacks or sell up. Bratislava eventually handed over a package of €15mn in incentives over 15 years.

That agreement, “which has kept the American owner in Slovakia and stabilised the situation at the company, still holds and is being observed”, the economy ministry spokesman added.

Given its role in eastern Slovakia, the steel plant – based in the country’s second biggest city – offers significant political clout for its owner. Hence, the speculation that Chinese and Russian bidders were eyeing the asset raised some concerns over the summer.

The Slovak government has appeared to have held back thus far, despite claims that it could buy into the mill. Bratislava apparently remains keen to see whether private buyers are willing to keep the plant afloat. PM Fico was thought to be against a Chinese bid, but in October it was reported that he had discussed the issue with the mysterious Chinese conglomerate CEFC.

Although US Steel Kosice still holds symbolic political weight, low global steel prices and new employers in the region – including IBM and AT&T – leave the region and country less exposed in real terms than they were just a few years ago. Yet a buyer from the east could still prove tricky to sell politically.

US Steel has remained tight-lipped over reports throughout the year that it is seeking to offload the Slovak plant. However, signs that the facility is likely to be on the auction block were everywhere in the summer, including detailed belt-tightening measures.