Commodities trader Sanjeev Gupta entered the European steel business seven years ago by purchasing a plant in Wales. This week he launched an offer for one of the oldest and most famous names in the industry.
With established manufacturers like ArcelorMittal and Tata Steel battling rising costs, stricter emissions regulations, and global overcapacity, Gupta has grown dramatically by picking up unwanted assets. His ambitions aren̵
Read more: Steel king no longer, Thyssenkrupp sells to survive
His latest destination is the Thyssenkrupp AG steel mill. The business, whose roots go back to the 19th century, is for sale as part of a major restructuring of the German conglomerate. Losses continue to rise after the pandemic slashes demand and prices, but Gupta says the combination can make savings.
The courageous – albeit non-binding – offer for Thyssenkrupp Steel would make Gupta’s Liberty Steel the second largest producer in Europe. While a deal is far from certain, the possibility of a relative upstart to acquire the venerable Thyssenkrupp steel mill is a strong reminder of the challenges faced by European producers.
The son of an Indian industrialist, Gupta moved to Great Britain when he was 13. In 1992, while studying at Cambridge University, he founded the goods retailer Liberty House. While his foray into European steelmaking began in 2013, he saw the 2015 and 2016 downturn as a real opportunity to grow.
GFG has snapped up several distressed steel plants around the world and business continued as prices and markets rebounded. He has regularly made headlines with ambitious remarks, from a $ 5 billion North American spending target for a 2018 plan to build the largest battery in the world.
Its rapid rise has also drawn attention. GFG is a loose network of companies owned by Gupta and his family that have never posted a single account record, making funding nearly impossible to track.
The group has also relied heavily on high-yield debt from Lex Greensill’s eponymous firm. Greensill Capital, which specializes in offering bill-linked loans, has been reviewed by regulators.
Read: Greensill has loaned Gupta companies in the UK, FT says
Gupta has promised to reform GFG and consolidate steel, aluminum and renewables into individual companies, each of which will publish aggregate financial statements.
Its other major challenge will be how European steel can function in times of high labor and production costs and increasingly stringent emissions regulations. Like other important producers, he is pushing for a border-adjusted carbon tax – practically a tariff on high-emission foreign steel. Gupta said he wanted the Liberty-Thyssenkrupp combined operations to be pioneers in green or low-carbon steel production.
“The concern is that they are expanding into Europe, which has traditionally been a very weak market in terms of profitability,” said James Campbell, steel analyst at CRU Group. “But what the market needs is a certain amount of consolidation.”
Gupta is not deterred by the crippling effects of the pandemic on steel demand and key customers like the auto industry.
“My confidence in taking such a big step for our company today is based on that belief,” Gupta told reporters. “Steel has a crucial place in our lives and a strategically important place in the future of Europe.”