UPDATE 1-Thyssen to sell stainless steel unit in $3.5 bln deal

Tue, Jan 31 03:57 AM EST * ThyssenKrupp agrees sale of Inoxum to Outokumpu * Deal includes cash, Outokumpu taking Inoxum debt * Union says gets pledges on German production sites * Thyssen shares up 1.3 pct, Outokumpu down 2.2 pct FRANKFURT, Jan 31 (Reuters) - ThyssenKrupp will go ahead with the sale of its stainless steel business to Finland's Outokumpu after clearing the 2.7-billion-euro ($3.5 billion) deal with its powerful trade unions. Germany's largest steelmaker said on Tuesday it will hold a 29.9 percent stake in the new combined company, moving towards a long-awaited consolidation of a sector that has struggled to combat overcapacity and cheap Chinese imports. ThyssenKrupp and Outokumpu said last week they were in early stage talks over a stainless steel tie-up. The German company said it would receive an unspecified cash payment from Outokumpu, which will also assume the debt and pension liabilities of ThyssenKrupp's stainless steel unit Inoxum. ThyssenKrupp shares were up 1.3 percent at 21.39 euros by 0821 GMT, outperforming the German blue-chip index, which was up 0.5 percent. Outokumpu shares were down 2.2 percent. ThyssenKrupp is being advised on the deal by Rothschild , Citigroup and Deutsche Bank, while Outokumpu's advisers are JP Morgan and Nordea. ThyssenKrupp, a steelmaking conglomerate whose business stretches from submarines to lifts, is in the throes of a radical restructuring that will see it shed non-core assets with revenues of 10 billion euros to slash debt. German trade union group IG Metall said Inoxum's Krefeld plant will be shut down by Dec. 31, 2013 while the meltshop in Bochum will not be closed before the end of 2016. It added the two companies had guaranteed not to close the remaining German production facilities until at least the end of 2015.