October 25, 2016 / 5:17 PM / in 2 years

UPDATE 1-Ternium may buy ThyssenKrupp's Brazil mill - sources

(Recasts, adds details on talks, share performance, background)

By Guillermo Parra-Bernal and Arno Schuetze

SAO PAULO/FRANKFURT, Oct 25 (Reuters) - Ternium SA has resumed negotiations to buy ThyssenKrupp AG’s money-losing Brazilian steel mill CSA Cia Siderúrgica do Atlántico SA, months after talks broke down because of legal and environmental concerns, three people familiar with the matter said on Tuesday.

Talks between Ternium and ThyssenKrupp are in an advanced stage, according to one of the people. While no formal offer for CSA has been extended yet, Ternium is interested in the possibility of using CSA to produce more slabs, which are in shortage in Brazil, two of the people said.

The people said price is a focus of the talks. Some analysts say CSA is worth less than $3 billion. Ternium is willing to go ahead with a deal at a price “significantly below market perceptions” about the asset, one of them added.

CSA, the largest foreign investment project ever in Brazil at an estimated cost of about $10 billion, has been operating since 2010.

Ternium’s Brazilian unit did not have an immediate comment. In a statement, Thyssenkrupp said it sees the future of CSA “outside the company,” making it “perfectly normal that we should conduct talks with possible interested parties.”

Japan’s Nikkei newspaper first reported the talks on Tuesday.


Shares of Thyssenkrupp shed 3.1 percent to 21.91 euros on Tuesday, paring back this year’s gain to 19 percent.

Ternium, an Italian-Argentine steelmaker part of the Techint Group of industrial companies, added 3.7 percent to $23.73 in New York trading, extending this year’s surge to 91 percent.

The steelmakers failed to agree on a deal earlier this year as CSA’s legal and regulatory setbacks worsened, said two of the people, who requested anonymity since the talks remain private.

The CSA plant, which is located in the city of Santa Cruz in Brazil’s Rio de Janeiro state, had been operating over the past six years with pre-license authorization after being the target of several pollution lawsuits.

CSA recently won a permanent operating license.

ThyssenKrupp has unsuccessfully tried to offload CSA since 2012, when it announced a plan aimed at reducing exposure to steelmaking.

Despite more than two centuries of steelmaking, ThyssenKrupp wants to concentrate on more profitable businesses including elevators, submarines and car parts and grow in Europe.

But Thyssenkrupp became the sole owner of CSA in April after partner Vale SA, the world’s No. 1 iron ore producer, exited for a token sum.

The German steelmaking giant sought to carve out new markets with the construction of two mills in Brazil and the United States during the middle of the last decade, but the projects were hit by cost overruns, poor project management and weaker-than-expected demand. (Additional reporting by Georgina Prodhan in Frankfurt, and Tatiana Bautzer and Alberto Alerigi Jr in São Paulo; Editing by Cynthia Osterman)

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