Tata Steel, ThyssenKrupp sign deal to form Europe's second-largest steelmaker

First stage of Tata’s merger with German steel maker Thyssen Krupp ‘agreed

First stage of Tata’s merger with German steel maker Thyssen Krupp ‘agreed

ThyssenKrupp and Indian rival Tata Steel on September 20 provisionally agreed to combine their European steel operations in a 50-50 joint venture, creating the continent's second-largest steelmaker.

ThyssenKrupp and Tata Steel will need to conduct due diligence before a joint venture contract can be signed at the beginning of 2018, the German group said.

The companies have signed a memorandum of understanding to combine their European steel activities in a 50-50 joint venture called Thyssenkrupp Tata Steel.

Tata Steel and German steel manufacturer ThyssenKrupp have agreed the first stage of a deal to merge the two companies.

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"This partnership is a momentous occasion for both partners, who will focus on building a strong European steel enterprise", he said.

That will free up cashflow to allow Tata Steel to focus on meeting growing demand in India, where Chairman N. Chandrasekaran said it will aim to double its manufacturing capacity in five years through plant expansions and acquisitions.

Tata, the Indian conglomerate that operates the Port Talbot steelworks, and Germany's Thyssenkrupp on Wednesday said that they had struck a preliminary deal to create the continent's second largest steel producer after ArcelorMittal, in a bid to tackle crippling oversupply in the market.

Holding half of the 20 seats on Thyssenkrupp's supervisory board, any change in tone among labour representatives is closely watched ahead of a September 23 meeting of the committee, where the plans will be discussed.

Shares in Tata Steel were up 0.7 per cent.

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Dr Heinrich Hiesinger, chairman of the executive board of Thyssenkrupp, said: "This business combination creates a strong number two and is thus much better positioned to cope with the structural challenges in the European steel industry". In Tata, we have found a partner with a very good strategic and cultural fit.

"The government has been working hard with the unions to secure a sustainable future for Tata Steel in the United Kingdom, its 4,000 employees at the Port Talbot site and its supply chain".

The deal could have sweeping implications for the industry and for 8,000 workers employed in the United Kingdom in particular.

The company reached a landmark deal last month allowing it to set up a new pension scheme, which will reduce its 15 billion pounds ($20 billion) in British pension liabilities, long seen as the main hurdle in merger talks that lasted more than a year and a half.

"In case that in the future developments would be that they would be underfunded, then the sponsor would still be Port Talbot, or Tata Steel UK, to overcome this issue", he told analysts on Wednesday.

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The deal is subject to approval from Thyssenkrupp's supervisory board and Tata Steel's board of directors, and alongside that of the European Commission.

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