NEW DELHI: The long-awaited joint venture (JV) between Tata Steel and ThyssenKrupp AG was finally sealed on Saturday. The two global steel giants approved combining of their European steel businesses to create the continent’s second-largest steel firm, after Lakshmi N Mittal-led ArcelorMittal.
“Tata Steel and ThyssenKrupp AG today signed definitive agreements to combine their European steel businesses in a 50-50 JV in a new company,” Tata Steel said. Named as ThyssenKrupp Tata Steel BV, the new entity will be based out of the Netherlands.
The merged entity will have a capacity to produce 21 million tonnes of steel and clock about 17 billion euros ($19.9 billion) in sales. The two companies have decided to retain their employees, which will take the total headcount to 48,000.
“The JV will create a strong pan-European steel company that is structurally robust and competitive,” said Tata Steel Chairman Natarajan Chandrasekaran, “This is a significant milestone for Tata Steel and we remain fully committed to the long-term interest of the JV company.”
The deal also comes at a time when European steel industry is facing challenges of a trade war following the introduction of 25 per cent tariffs on steel imports by the US on June 1.
“The JV not only addresses the challenges of the European steel industry… It is the only solution to create significant additional value of around 5 billion euros for both ThyssenKrupp and Tata Steel due to joint synergies, which cannot be realised in a standalone scenario,” ThyssenKrupp CEO Heinrich Hiesinger said.
While the JV gives equal shareholding to the two companies, ThyssenKrupp will get a bigger share from the proceedings out of an expected IPO, reportedly a 55:45 ratio. The German company would also have the right to exclusively decide on the timing of an IPO.
Both the companies had, in September last year, announced plans to combine their European operations and form an equal JV. Last year, ThyssenKrupp has said that it expects its proposed JV with Tata Steel Europe to be finalised by the end of 2018.