Economy

Thyssenkrupp, Tata seal deal on European steel JV

Thyssenkrupp, Tata seal deal on European steel JV

The JV between two of the world's major steel companies will combine Thyssenkrupp and Tata Steel's European steel operations to create Europe's second-largest steelmaker after steel tycoon Lakshmi N Mittal's ArcelorMittal.

Even as the initial memorandum of understanding signed between two parties in September 2017 had envisioned an equal JV, deteriorating performance of the Tata Steel Europe (TSE) and improving operation of Thyssenkrupp, had prompted some of the shareholders of the German company asking the management to seek a bigger share of the proposed joint venture.

Commenting on the deal, Natarajan Chandrasekaran, chairman of Tata Steel, said: "The joint venture will create a strong pan-European steel company that is structurally robust and competitive".

Until closing, thyssenkrupp Steel Europe and Tata Steel in Europe will continue to operate as separate companies and as competitors.

Both the companies had in September a year ago announced plans to combine their European operations and form an equal joint venture.

Thyssenkrupp said it also secured the right to decide when a listing might take place, adding the joint venture was aiming for a dividend payout in the low-to-mid-triple-digit million- euro range.

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The joint venture is part of Thyssenkrupp Chief Executive Officer Heinrich Hiesinger's goal to transform the steel-to-submarines conglomerate into a technology company.

The two firms will each have a 50 percent share in the new company called Thyssenkrupp Tata Steel, which will be headquartered in the Netherlands and employ 48,000 people at 34 sites worldwide. "This is a significant milestone for Tata Steel and we remain fully committed to the long-term interest of the joint venture".

Hiesinger had faced pressure from activist funds Cevian and Elliott to extract more commitments from Tata Steel, whose European business has performed worse than Thyssen's since the agreement was first announced, creating a valuation gap.

Tata Steel and German firm Thyssenkrupp have agreed a merger deal.

Both firms employ a total of 48,000 workers, with Tata owning United Kingdom plants including Port Talbot in South Wales, which employs 4,000 people.

The German group also said it now expects annual synergies of 400 million to 500 million euros from the transaction, having previously communicated a maximum of 600 million.


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