Tata Steel to be junior partner, post ThyssenKrupp merger

Vidya Ram London | Updated on June 29, 2018

Tata Steel and ThyssenKrupp are close to finalising the terms of a long-awaited merger, paving the way for the creation of Europe’s second largest steel company after ArcelorMittal.

The deal is expected to be concluded within days, various British media reported. Tata Steel’s Dutch division has given the merger its support, Reuters reported, while according to Bloomberg, the General Work’s Council of ThyssenKrupp, which once had reservations about the deal, was also on board with the new terms. The terms include Tata Steel taking an approximately 45 per cent stake, and ThyssenKrupp the remaining 55 per cent— a shift from the 50-50 deal initially on the table.

A number of activist investors in ThyssenKrupp had pushed for a reconfiguration of the terms of the deal. Earlier this month, workers at Tata’s European operations flagged concerns around the planned merger, warning that they remained “unconvinced” that the deal represents the best interests of Tata Steel Europe operations and employees. The deal would, therefore, have to address the concerns of unions across the board.

The agreement would put an end to protracted negotiations. In September 2017, Tata Steel and ThyssenKrupp signed a memorandum of understanding (MoU) on the merger, following the agreement Tata Steel reached with the UK authorities to reach its pension scheme liabilities in the UK.

According to the MoU last year, the merged company would generate pro forma sales of about €15 billion a year, with about 48,000 employees across 34 locations. Any deal is likely to involve further reassurances on the jobs and facilities.

European steel makers have been opting for consolidation to combat the persistent challenges facing the industry. These include overcapacity and pricing, particularly amid the competition from China and beyond. In recent months, US tariffs on steel and aluminium imports has added another dimension – restricting access not just to the US market, but also leading to more products being diverted from elsewhere to Europe.

In May, an ArcelorMittal-led consortium gained the necessary EU regulatory approvals, even though Ilva, a nationalised Italian steel plant, currently awaits handover from Italian authorities.

Published on June 29, 2018

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