Steel trader Klöckner expands business in North America with acquisition

Kloeckner & Co.

The steel trader expands with an acquisition in North America.

(Photo: dpa)

Dusseldorf In view of extensive subsidy programs in the USA, the Duisburg-based steel trader Klöckner & Co. wants to expand its business in North America and is relying on the takeover of a competitor. As the SDax group announced on Monday evening, the subsidiary Kloeckner Metals Corporation, with which the steel trader is represented in the USA, will acquire the competitor National Material of Mexico ( purchase NMM).

In an interview with the Handelsblatt, Klöckner CEO Guido Kerkhoff explained that the deal was of crucial strategic importance: “We see that many of our customers are currently looking for new production sites in Mexico to meet the high demand from the USA.”

This applies in particular to the automotive industry, many of which are already represented in Mexico and have enough workers there. “By acquiring NMM, we can expand our portfolio with electrical steel, for example, which is urgently needed for e-vehicles.”

With the “Inflation Reduction Act” (IRA) subsidy program, the US government wants to push the switch to an ecologically sustainable economy in the next few years. The beneficiaries include many industrial companies that are currently still emitting a lot of CO2 but want to convert their production to climate-neutral processes in the next few years.

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An important sector is the steel industry, which is responsible for the majority of all industrial emissions. In Europe, manufacturers have been working on converting their plants to hydrogen for some time – but are still reaching financial limits.

“Everything will move much faster in the USA”

In the USA, on the other hand, a large part of the steel industry initially shied away from switching to hydrogen. However, according to the Klöckner boss, the IRA funding is now moving the issue. “We see that many of our US customers are now approaching us to secure green steel,” says Kerkhoff.

The manager sees the USA as having a clear advantage when it comes to building up the renewable energy capacities they need to produce green steel. “Everything will go much faster in the USA, which is why it is important to actively position yourself in this region.” It is conceivable that Klöckner will also offer green steel from US production for European customers in the future.

The purchase was initially poorly received on the stock exchange. Shortly after the announcement in over-the-counter trading, the share price collapsed by around 3.5 percent. After the start of trading, however, the share was able to largely make up for the loss.

Kerkhoff rejects the accusation that the purchase price may have been too high, which could have triggered the temporary price drop. “In view of the immense growth potential that results from the purchase, I consider a purchase price of around seven times the enterprise value multiple based on the Ebitda expected for 2022 to be very appropriate.”

More: Steel trader Klöckner & Co. cuts profit forecast

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