Thyssenkrupp-Kone elevator merger ‘would trigger legal war’ Schindler

ThyssenKrupp elevators at its headquarters in Essen, western Germany. Thyssenkrupp went deeper into the red in its 2018-19 fiscal year. (AFP)
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Updated 14 February 2020

Thyssenkrupp-Kone elevator merger ‘would trigger legal war’ Schindler

  • Abu Dhabi sovereign fund consortium also said to be in running for company

FRANKFURT: Swiss elevator maker Schindler would embark on an all-out antitrust offensive in the courts to stall any deal to combine Thyssenkrupp’s lift division with rival Kone, board member Alfred Schindler told Reuters.

His comments came a day after the deadline for bids for Thyssenkrupp Elevator, with Finland’s Kone and three private equity consortia vying to buy it in a deal sources say could be worth up to $18.6 billion.

A Kone-Thyssenkrupp Elevator merger would create the world’s biggest lift maker, leapfrogging market leader Otis, and Schindler in second place.

“We would probably file lawsuits in Europe, the United States, Canada, China and possibly Australia. These cases would take at least three to four years,” said Schindler, who is now chairman emeritus of the company he ran for 26 years. He said that other rivals would probably take legal action too: “You can safely assume that neither Otis nor Schindler will simply accept being driven out.”

Thyssenkrupp and Otis declined to comment. A Kone spokeswoman said it believed there was room for consolidation in the sector. Shares in Kone fell as much as 3.9 percent after Schindler’s comments while Thyssenkrupp rose slightly.

Once a symbol of Germany’s industrial power, Thyssenkrupp is struggling with €12.4 billion (13.5 billion) of debt and pension liabilities after years of ill-fated investments, and needs to raise money from its prized elevator division to restructure. Thyssenkrupp’s supervisory board is due to meet on Feb. 27 and a decision on the fate of the elevator business could be made then, two people familiar with the matter said.

Besides selling all or part of the business, Thyssenkrupp is considering an initial public offering, though sources said this option was less likely. Solely based on bids, Kone and a consortium of Blackstone, Carlyle and the Canada Pension Plan Investment Board look best-placed to reach the final round but no decision has been made, the people said.

Kone has made a non-binding bid of €17 billion while the consortium has offered about €16 billion. It was not clear whether Kone had improved its earlier offer. A consortium comprising Advent, Cinven and the Abu Dhabi Investment Authority and an alliance between Canada’s Brookfield and Singapore’s Temasek are also in the running, sources have said.

While a sale to Kone would probably raise the most cash for Thyssenkrupp, the beleaguered conglomerate is concerned it could trigger antitrust investigations where the combined company would be a major player, such as Europe and the US. “Such a hypothetical takeover would . . . have considerable effects on the structure of the relevant markets and most likely lead to significant negative impacts on effective competition in many markets,” a DICE Consult report said.

Kone has drawn up plans to hand Thyssenkrupp’s European assets to private equity firm CVC but the European Commission typically prefers industrial buyers that can compete better with the firm offloading assets.

OPEC and its allies meet to discuss oil output cuts

Updated 06 June 2020

OPEC and its allies meet to discuss oil output cuts

  • The meeting, originally scheduled for next week, was brought forward to Saturday

VIENNA: OPEC and its allies were holding talks via video conference Saturday to assess their current deal to slash production as oil prices tentatively recover on easing coronavirus lockdowns.
The 13-member group and other oil producing nations such as Russia and Mexico are discussing an agreement reached in April to boost prices, which have plummeted over falling demand as countries around the world have imposed strict lockdowns to stop the spread of the new coronavirus.
The meeting, originally scheduled for next week, was brought forward to Saturday at the suggestion of Algerian Oil Minister Mohamed Arkab, who currently holds the rotating presidency of the Organization of Petroleum Exporting Countries.
Under the terms of the April agreement, OPEC and the so-called OPEC+ pledged to cut output by 9.7 million barrels per day (bpd) from May 1 until the end of June.
The reductions would then be gradually relaxed from July, with 7.7 million bpd taken off the market from July to December.
But at Saturday’s talks, crude producers were expected to discuss extending the 9.7 million bpd beyond June, even if agreement might prove difficult to reach.
The April deal was signed after days of wrangling between major players, whose revenues have been ravaged by the collapsing oil market this year.
“It seems very likely the May-June cuts will be extended by another month,” said Bjornar Tonhaugen, analyst at Rystad Energy.
Some market observers are expecting the cuts to be extended still further, possibly until the end of the summer or even until the end of the year.
Although more countries around the world are gradually moving out of lockdown, crude consumption has not returned to pre-confinement levels, which had already been comparatively low.
As in previous negotiations, discussions could prove particularly tense between Russia and Saudi Arabia, the deal’s two heavyweights who became involved in a short but bitter price war when previous talks broke down in March.
Mexico, which held up the April deal before it was eventually finalized, has also already ruled out any further drop in oil production with its president, Andres Manuel Lopez Obrador, saying on Friday his country “could not adjust our production further.”
Another major bone of contention could be the willingness of each country to abide by the agreed production quotas, suggested RBC analyst Al Stanton.
According to data intelligence company Kpler, OPEC+ reduced output by around 8.6 million bpd in May, a smaller cut than planned, with Iraq and Nigeria seen as the main culprits.
Nigeria’s Ministry of Petroleum Resources said in a tweet Saturday that it backed discussions to allow countries which failed to conform fully to the agreed cuts in May and June to make up for it in July, August and September
Despite the difficulties, the output cuts have helped support oil prices, which rose to around $40 per barrel at the start of June for both the US benchmark, West Texas Intermediate (WTI), and Europe’s Brent North Sea contracts.
Around April 20, both had slumped to historic lows, with Brent falling as low as $15 and WTI even entering negative territory.