Published : 1 month ago, on 06/11/2024

DUESSELDORF (Reuters) -Shares in German steel group Salzgitter surged by as much as 37% on Tuesday after the company said that second-biggest shareholder GP Guenter Papenburg and a partner were considering a takeover offer.

Based on after-hours trading following Salzgitter’s announcement late on Monday, Germany’s second-largest steel group behind Thyssenkrupp could achieve a market value of about 900 million euros ($980.6 million).

The state government of Lower Saxony, where Salzgitter is based, said on Tuesday that it will examine the possible takeover of the steel group by Papenburg and TSR Recycling.

A Papenburg statement said that the talks would explore a public takeover offer as a way to strengthen the influence of Salzgitter and secure its transformation towards green steel.

Papenburg already holds 25.1% in Salzgitter, slightly less than the 26.5% owned by Lower Saxony.

Salzgitter had said on Monday that a deal would be done if the suitors reached a shareholding of at least 45% plus one share but did not disclose the potential offer price.

Shares in the company opened with a 25% gain on Tuesday and were on track for their best one-day performance.

We expect near term upside to the share price. M&A and potential consolidation in the European steel sector is likely to provide near-term support for European steel equities,” JP Morgan analysts said.

The finance ministry in Lower Saxony said it would examine the intended takeover and its consequences thoroughly, with particular focus on the interests of employees, which number about 25,000.

“A substantive position will only be possible after the examination has been completed,” the ministry added.

The potential takeover comes against a backdrop of a steel sector struggling to contend with high energy prices, weak demand from customers – especially in the automotive and mechanical engineering industries – and foreign competition.

Last month Salzgitter cut its full-year forecast and reported a drop in earnings for the first nine months of 2024.

($1 = 0.9178 euros)

(Reporting by Tom Kaeckenhoff and Urvi DugarWriting by Miranda MurrayEditing by David Goodman)