BERLIN/FRANKFURT - Emirates Steel Arkan has walked away from a potential investment in Thyssenkrupp's steel business, a source familiar with the matter told Reuters.

The state-backed firm stopped actively pursuing a deal due to concerns over pension liabilities and other complexities of the business, the source said.

Emirates Steel was considering buying a stake in the Thyssenkrupp unit, which has seen interest from other bidders including India's JSW Steel Ltd also wane, the source added.

A spokesperson for Thyssenkrupp declined to comment. Bloomberg was first to report the news on Thursday.

The German conglomerate is exploring various options for its steel division, which management sees as a drag on performance due to its cyclical nature.

Previous efforts to merge the division with a peer, sell it to a rival, list it or spin it off have all failed.

(Reporting by Emma-Victoria Farr; Writing by Rachel More; Editing by Miranda Murray and Jonathan Oatis)