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Outokumpu JV to Launch Turnaround for Tubular Unit
07/05/2011 - Outokumpu has signed a letter of intent with Andrea Gatti on a joint venture arrangement for Outokumpu's tubular unit whereby a company controlled by Gatti will become a minority owner in OSTP with an option to become a majority owner in the coming years.
Outokumpu has signed a letter of intent with Andrea Gatti on a joint venture arrangement for Outokumpu's tubular unit (OSTP).
Subject to the signing of the final agreement, a company controlled by Gatti will become a minority owner in OSTP with an option to become a majority owner of the business in the coming years.
"We welcome Andrea Gatti as our partner in OSTP's turnaround,” said Outokumpu CEO Mika Seitovirta. “I am convinced that jointly we can reform OSTP to a profitable entity. Staying as an owner in the business enables Outokumpu to maintain the relationship as a supplier to the OSTP units and retain a big part of the value increase that we expect the turnaround plan to deliver."
Subject to the signing of the final agreement, a company controlled by Gatti will acquire 36% of the shares in OSTP, and Gatti will have an option to acquire shares to 51% ownership within a three-year time period. Outokumpu will have an option to redeem the shares at original value if Gatti does not acquire the majority of OSTP. The parties have also agreed that Outokumpu will remain OSTP's main raw material supplier.
A final agreement on the joint venture is expected to be signed by the end of the third quarter.
OSTP will be separated from Outokumpu and it will be managed through the OSTP Board, with a Chairman appointed by Outokumpu. The turnaround plan for OSTP, which will be further detailed by the joint venture partners, is to include significant streamlining of the production structure, optimization of the product portfolio, and general cost reduction.
This initial sale of shares will not result in any material financial impacts for the Outokumpu Group. As Outokumpu will continue to be the majority shareholder, it will initially be responsible for financing of the business and OSTP will continue to be consolidated in Outokumpu's financial accounts. Any future sale of shares would be executed at a price that reflects the then-prevailing financial performance of the business. OSTP has been loss-making for the past three years and its operating loss in 2010 totaled close to EUR 40 million.
Andrea Gatti has over 25 years' experience in the stainless steel industry as an entrepreneur. He served as an Outokumpu executive from 2005 to 2009.
OSTP produces welded stainless steel process pipes and tubes as well as threaded and butt weld fittings. It has a total production capacity of about 100,000 tonnes with 11 production sites in Sweden, Finland, USA, Saudi Arabia, Estonia and Canada. OSTP employs some 970 people.
Outokumpu is a global leader in stainless steel with the vision to be the undisputed number one. Outokumpu employs some 8,000 people in more than 30 countries. The Group's head office is located in Espoo, Finland.
