16 October 2019 by jbchevrel
A notable mover in iTraxx Xover s32 today was Thyssenkrupp (TKAGR – 5y CDS ~-10bp) after it was reported that the two PEs Blackstone and Carlyle have teamed up for a potential bid for TKAGR’s elevators unit. They are considering a joint offer for the business. The anonymous source added that no final decisions have been made, and there’s no certainty they will proceed with a formal bid. The 5y CDS tightened to ~240bp on the back of this and the cash was a tad richer, the Feb25s ticked above 103 (Z ~210bp). There was also this morning a reported interest in TKAGR’s elevator unit from Kone, so this could to a bidding war, raising the unit's valuation toward the high end of the consensus’ €15-20b. Kone is indeed considering partnering with CVC, another PE, according to Bloomberg. This has been going on since this summer, but it had been discounted because of the general view that antitrust challenges would pose considerable risk to a Kone-TKAGR deal being completed. The fact that Kone now plans to partner with PE CVC is interesting because it could ease the burden of financing while alleviating antitrust concerns. The leg tighter still doesn’t reflect an expectation of TKAGR coming from Ba2n/BB to IG. For that to happen, we would probably need to see steel prices rebound, FX headwinds revert, rising raw-material costs fade, among others. For reference, TKAGR had proposed last year to split into 2 businesses: Thyssenkrupp Materials and Thyssenkrupp Industrial, the latter being itself split into 3 units (elevator, components technology i.e. automotive supplier and industrial solutions i.e. chemical and cement plant, mining equipment services). That was meant to make the company’s structure leaner, a step for to achieve lower than €300m general and administrative cost, by 2021 fiscal year.