US Steel to "explore" unsolicited approaches for Slovakia's biggest employer

By bne IntelliNews November 14, 2012

bne -

US Steel, fretting over forecast results for the fourth quarter, is set to "explore" unsolicited interest in its Slovak plant - the country's largest employer - despite extolling its location and labour costs.

Reports suggest that the US company has received approaches from ThyssenKrupp and unnamed investors from Ukraine, amongst others for US Steel Kosice, and that it's ready to entertain them, less than a year after it sold its Serbian operation for $1. Local newspaper Sme on November 13 cited trade-union leader Mikulas Hintos as confirming that the US company is in the "early" stages of talks with undisclosed potential bidders.

The previous day, local spokesman Jan Baca confirmed the US company has received approaches from more than one suitor, but would not discuss the identities of the interested parties, citing confidentiality agreements. US Steel will "explore this interest," he said, while also stressing no decisions have been made. He also played up the bids, saying that the plant's location, low labour costs, and a good product portfolio for growing markets in the Czech republic, Hungary, Poland and Slovakia, are the factors behind the interest.

The Eurozone crisis, accompanied by rising energy and raw material costs, dented the unit's revenues in 2011, which sent it to a net loss of €25m, compared with profit of €96m a year earlier. However, it is particularly enjoying its role in supplying the Slovak car industry this year, with production in the sector booming, and even pushing the economy to relatively stunning growth compared with the rest of the Eurozone, where carmakers are struggling to stay on the road. That has seen US Steel Kosice swing back into the black, posting an operating profit of $27m in the first nine months of 2012.

The Pittsburg-based parent company said in October that with global growth - and China in particular - slowing, the resulting plummet in steel prices will dent its fourth-quarter results. Meanwhile, German Thyssen, in the throes of a radical restructuring in which it is trying to sell assets to slash debt and refocus the group on its core European business, denied any interest in its Slovak unit.

US Steel acquired the former government-owned Kosice plant in 2003 for $475m, and expanded its CEE foothold three years later with the $33m acquisition of Serbia's government-owned steel producer. Initially profitable, the ventures were battered beginning in 2008 by the European economic crisis.

According to the Pittsburgh Post-Gazette, the Slovak plant is facing huge investment needs in the coming years. In a securities filing last month, US Steel estimated it will have to spend up to $400m by 2016 to comply with new EU environmental mandates that the Slovak Republic must adopt by January.

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