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Thyssenkrupp’s elevator bidders, including Brookfield, CPPIB, on edge as board fights over decision

Thyssenkrupp’s elevator bidders, including Brookfield, CPPIB, on edge as board fights over decision
Business
The four remaining bidders vying to acquire Thyssenkrupp AG’s elevator business have been left anxiously waiting as board members at the beleaguered industrial conglomerate fight over their preferred buyers.

The steelmaker’s board has been debating which suitors to choose for final negotiations after receiving the latest bids on Feb. 11, with diverging views among various executives and labour representatives, according to people familiar with the matter. A decision, which was expected in the last two days, is now dragging on into Friday or beyond, the people said.

The crux of the debate: whether to take the highest offer, from Finnish rival Kone Oyj, despite antitrust risks or go with competing bids from private-equity suitors that don’t have competition issues. The deal would be the biggest acquisition in Europe this year, according to data compiled by Bloomberg.

Kone’s consortium increased its bid to more than 17 billion euros (US$18.4 billion) in the latest round in an attempt to widen the gulf with its rivals, the people said, asking not to be identified because the information is private. Bidding groups led by Blackstone Group Inc., Advent International and Brookfield Asset Management Inc. each offered close to 16 billion euros, according to the people.

Thyssenkrupp, once an emblem of German industrial prowess, can barely afford to wait. The steelmaker has been bruised by a manufacturing slowdown and rising pension costs. The company on Thursday announced quarterly results that laid bare the company’s rapidly deteriorating finances as debt surged and losses deepened.

The three private equity bidders are each pitching why they’d be the best owner. Blackstone, which teamed up with Carlyle Group Inc. and Canada Pension Plan Investment Board, made the highest offer among the buyout groups by this week’s deadline, according to the people. A consortium including Advent, Cinven and the Abu Dhabi Investment Authority is touting its track record doing large German deals.

Brookfield, which partnered with Temasek Holdings Pte, has told labour unions it plans to reinvest in the business, the people said. Discussions are ongoing, and suitors are still making tweaks to their offers, the people said.

Representatives for Advent, Blackstone, Brookfield and Kone declined to comment. Thyssenkrupp has said it will make a decision by the end of February, according to a representative for the company, who declined to comment further.

Thyssenkrupp Chief Financial Officer Johannes Dietsch said Thursday a deal with a strategic investor would mean the company only receives the money after a long, thorough antitrust review. This must be taken into account when Thyssenkrupp decides the best way forward, Dietsch said on a conference call with reporters.

Shares of Thyssenkrupp were up 1.1 per cent at 9:16 a.m. Friday in Frankfurt, giving the company a market value of 7 billion euros.

Finland’s Kone, the only remaining strategic bidder, has tried hard to address concerns about a drawn-out competition review. It plans to hand the elevator operations in Europe to bidding partner CVC Capital Partners, while offering to fully assume any antitrust risks. It has also promised a multibillion-euro upfront payment that Thyssenkrupp would keep even if the deal is blocked by competition authorities, Bloomberg News reported last month.

Some executives at Thyssenkrupp fear that heavy scrutiny from European antitrust authorities on a Kone bid would lead to months of delays and perhaps the ultimate failure of the deal. The German company’s aborted attempt to merge its steel business with Tata Steel Europe still haunts executives, who thought European Union Competition Commissioner Margrethe Vestager unfairly torpedoed the plans.

Some private equity suitors have offered major Thyssenkrupp investors the chance to keep a minority stake in the elevator unit and have discussed plans to relist the business in Germany in a few years, people with knowledge of the matter have said.

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