FRANKFURT -- German steel and engineering group ThyssenKrupp AG has been forced to pay almost three times market prices to buy back shares owned by Iran in a bid to protect its business in the United States.
The world's biggest stainless steel producer said on Monday it had paid 406 million euros ($473 million), or around 24 euros per share, to buy back just under 17 million shares from IFIC Holding AG, which is owned by Iran.
News of the outlay came on the same day the group announced a wave of disposals aimed at cutting its high debt levels.
A source familiar with the situation said the company, which made over a quarter of its revenues in the United States last year, had been warned by Washington that it would be placed on a "black list", which would compromise its chances of winning business in the United States, unless Iran reduced its stake.
"Threatened restrictions... relating to the unrestricted market access of ThyssenKrupp subsidiaries in the U.S. will be avoided, averting serious economic damage to the group's business in the U.S.," the company said in a statement.
The move, which the company said would have no affect on its pre-tax profit, reduces Iran's stake in Thyssen to below five percent from a previous 7.8 percent. Thyssen aims to sell the shares on the open market in the medium term.
Thyssen's stock slumped over six percent, falling as low as 8.73 euros in afternoon Frankfurt trade, as investors regretted that the company had paid so much for the stake at a time when it is battling to cut its debt.
Iran, accused by the U.S. of sponsoring terrorism, first bought a stake in the steelmaker in 1974. Iranian government minister Mohamad-Mehdi Navab-Motlagh still sits on the supervisory board.
"What is disappointing is the company has paid a very high price for these shares. It will not affect the profit and loss, but it will increase their financial liabilities," one Frankfurt-based equity analyst said.
Thyssen is under increasing pressure from both credit analysts and equity investors to trim its debt, particularly after credit ratings agency Standard & Poor's cut it to "junk" status in February, citing a pension fund shortfall.
The group said its supervisory board had approved plans to dispose of businesses with combined sales of around seven billion euros to cut net debt, which stood at 4.9 billion euros at the end of March, down 2.4 billion from a year earlier.
It will then focus on its core steel, capital goods and services businesses as it restructures and tries to lift group sales to 40-46 billion euros in the medium term through both organic growth and selective acquisitions.
It did not name the assets earmarked for disposal or provide a timeframe, but a source close to the company said the program would take two to three years and affect around 30,000 jobs at 33 business units.
"One of the difficulties is that they have to make these disposals, but generally they are either bad businesses, which means they may have to book a loss on the disposal, or good businesses, which will be significantly earnings dilutive," said Societe Generale analyst Fabrice Theveneau.
Finance chief Stefan Kirsten told an analysts' conference on Friday that the group had firmed its disposal plans but said timing was the main problem because currently weak markets meant it would probably not get the price it wanted for the assets.