ThyssenKrupp, Tata to merge European steel operations

Gladys Abbott
September 21, 2017

"Tata Steel Ltd and Thyssenkrup AG have signed an MoU to create a leading European enterprise by combining the flat steel businesses of the two companies in Europe and the steel mill services of Thyssenkrupp group", the domestic steel giant said in a statement.

"Under the planned joint venture, we are giving the European steel activities of Thyssenkrupp and Tata a lasting future", Thyssenkrupp CEO Heinrich Hiesinger said.

"Over all, this is a good deal", said Dalton Dwyer, managing director of Industry Corporate Finance, a London-based firm that advises on steel mergers.

With this agreement, Tata's plants in the Netherlands and United Kingdom will be combined with Thyssenkrupp's German assets and would be managed through the entity's headquarters in Amsterdam.

The two foresee annual synergies of 400 million €($480 million) to €600 million, helped by savings on areas including capacity utilisation, sales and administration and research and development.

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The companies have signed a Memorandum of Understanding (MoU) in 50:50 joint venture for their European assets.

According to Thyssenkrupp's statement, there is structural overcapacity in European steel sector, and a constantly high import pressure.

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Earlier, labor representatives, who have half of the seats on Thyssenkrupp's supervisory board, had also expressed concern over job losses.

"The strategic logic of the proposed joint venture in Europe is based on very strong fundamentals and I am confident that Thyssenkrupp Tata Steel will have a great future".

Currently, shares in Tata Steel are up 1.63 percent, whilst shares in Thyssenkrupp are up 3.62 percent as of 12.10PM (GMT).

As the partnership between the two companies progresses, Tata Steel is "well-positioned" to leverage India's growing economy by adding significant capacity in value-added products to meet emerging customer needs, said Mr Chandrasekaran.

The new company includes the former Hoogovens plant in IJmuiden which was merged with British Steel to create Corus in 1999.

Roy Rickhuss, chair of the steel coordinating committee representing UK unions Unite, GMB and Community, said the unions recognised the industrial logic of the deal, but would still press Tata to confirm it will invest in the Port Talbot steelworks, a vital regional employer.

Thyssenkrupp will not be liable for any future funding demands of a new pension scheme sponsored by Tata Steel UK, its chief financial officer said.

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