Sanjeev Gupta’s Liberty House is preparing a bid to buy the lossmaking steel operations of Germany’s Thyssenkrupp, an audacious swoop that, if successful, would propel the deal-hungry businessman to the top ranks of European industry.
The UK-headquartered group has been working on a potential offer for its larger rival and could make an announcement as soon as Friday, according to several people aware of the matter.
A tie-up would merge the activities of the continent’s fourth and second-biggest producers of the grey metal, which turn over billions of euros and together employ about 40,000 people at sites that form a bedrock of Europe’s manufacturing sector.
However, it would probably encounter stiff opposition from unions, who fear job losses and are lobbying for the German state to take a stake in the beleaguered unit.
The three contenders to succeed Angela Merkel at the head of Germany’s governing Christian Democrat party all come from North Rhine-Westphalia. They will face political calls to secure Thyssenkrupp’s future in the region.
Liberty’s interest in the steel division, which was first reported by Der Spiegel magazine, follows a dizzying run of acquisitions by Mr Gupta in areas ranging from metals and mining to renewable power and banking.
The Indian-born magnate’s ascent within a few years from obscure commodities trader to globe-trotting industrialist running a $20bn business empire has sparked scrutiny of the finances of GFG Alliance, the family-owned collection of investments to which Liberty belongs.
Thyssenkrupp has made no secret of its desire to find a way out of the steel business, which is suffering from its exposure to the shrinking car industry and the impact of Covid-19, with the company warning it could lose as much as €1bn this year. The sprawling conglomerate is being broken up by management following pressure from shareholders.
Earlier this year, the German industrial group sold its elevators division for €17bn to private equity investors and preliminary talks have been held on a tie-up with Swedish steelmaker SSAB and Indian group Tata. A merger with domestic rival Salzgitter has also been considered.
Any approach by Liberty will inevitably lead to questions on how it would finance a takeover. Its rapid growth has largely relied on often expensive forms of borrowing related to unpaid customer bills, while Mr Gupta has also leant on public authorities for support.
A number of Liberty’s mills have come under fire for late payments to suppliers and, following criticism over a lack of financial transparency, the privately controlled company has promised to publish consolidated accounts.
Although a combination between the two steelmakers could help reduce costs in a sector that has struggled for years with foreign competition and overcapacity, European regulators may prove another obstacle. Brussels blocked a proposed steel merger between Thyssenkrupp and Tata Steel’s European arm last year over concern it would reduce competition.
Liberty and Thyssenkrupp declined to comment.