Thyssenkrupp Shares Jump on Tata Steel Tie-Up Talk

FRANKFURT--Thyssenkrupp AG's shares soared Friday following a report that India's Tata Steel Ltd. may be interested in taking a stake in the German industrial conglomerate's European steel business.

Thyssenkrupp's shares were up as much as 7.7%, in early morning trading.

German newspaper Rheinische Post reported that talks between Thyssenkrupp and Tata Steel were in an "advanced stage," citing government sources. The two sides would most likely pursue a joint venture, with an option for Tata Steel to increase its stake down the road, according to the paper.

Thyssenkrupp and Tata Steel declined to comment on the report.

Tata Steel is Europe's second-largest steelmaker by production capacity, after Luxembourg-based ArcelorMittal SA.

News of a possible tie-up comes as the steel sector has been suffering from oversupply, which has in turn driven down prices. That trend has been exacerbated by an economic slowdown in China, the world's largest steel producer and user.

Tata Steel on Wednesday announced it would explore selling its struggling U.K. steel business in a move that could threaten thousands of local jobs. In recent months, the company had announced several rounds of layoffs at its U.K. operations, where it has three integrated steelmaking sites.

Thyssenkrupp Chief Executive Heinrich Hiesinger has said in the past that consolidation in the sector would make sense, but has also stressed that it would be difficult to find a buyer for the company's beleaguered European steel operations.

Analysts and investors have long suspected that Thyssenkrupp could shed its European steel division, as Mr. Hiesinger continues to refocus the company around its capital goods businesses.

"[Combining] Thyssenkrupp and Tata is seen as the best solution in Europe, both in terms of products and regions," said analyst Dirk Schlamp of Germany's DZ Bank, noting that such a measure would stabilize the market. "Thyssenkrupp could aim at completely exiting the steel business in the medium to long term," Mr. Schlamp added.

Write to Natascha Divac at natascha.divac@wsj.com

(END) Dow Jones Newswires

April 01, 2016 05:55 ET (09:55 GMT)

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