MUMBAI: Tata Steel seems to have finally found a way out of the European mess that started with the acquisition of Corus Steel. On Thursday, the company announced the merger of its steel operations in Europe with German steel giant Thyssenkrupp in a 50:50 joint venture. The deal, according to N Chandrasekaran, chairman, Tata Group, will help it grow faster and double the capacity. The deal creates a strong and clean balance sheet, strengthens the product basket, besides enriching the R&D capabilities. The two companies expect annual synergies of 400-600 million euros.
“Tata Steel India is in a strong position to grow faster and set to double its capacity through organic or inorganic route, post deal with Thyssenkrupp,” he said making a rare media appearance here on Thursday.
According to a joint statement, Tata Steel Ltd and Thyssenkrupp AG will both take a 50 per cent stake in Thyssenkrupp Tata Steel BV, contributing assets of their respective flat steel businesses, while Thyssenkrupp will also contribute its steel mill services.
“Consolidation in the steel industry augurs well for the business - as steel industry is relatively fragmented compared to its global suppliers of iron ore, Coking coal as well as customers. For example, in the value added innovation led product segments, customers are truly global OEMs,” said Anjani Kumar Agarwal, partner and national leader – metals and mining, EY.
The trend of regional consolidation is quite profound – examples include four large combinations in China as well as Arcelor Mittal acquiring ILVA, Italy’s largest producer. According to Agarwal, the synergies cited by both companies are a reflection of the reality of the environments the companies are operating in.
“The combined business, when well integrated, will emerge stronger riding on R&D, advanced technologies, integrated supply chains, differentiated products, complementary markets and customers,” he explained.
Meanwhile, according to Chandrasekaran, the deal is expected to close by December this year or early next year. As per the MoU signed between the two, the proposed JV would be based in Amsterdam region of the Netherlands and will supply premium and differentiated products to customers, with annual shipments of about 21 million tonnes of flat steel products.
Going private
Tata Sons Ltd’s much-awaited AGM stated for Thursday will seek approval of minority shareholders to take the company private from its current public limited company status. Such a move can be done only after 75 per cent of the minority share-holders give consent, followed by NCLT’s nod. Currently, Tata Trusts have a majority stake of 66 per cent in the public limited entity, while former chairman Cyrus Mistry and his family firms hold 18 per cent.
The rest is with other Tata Group firms and family members of Tata. According to Tata Sons, retreating to a private entity status will mean less compliance, restrictive transfer of shares. Mistry and family firms oppose the move. If the proposal gets through, Tata Sons will rename itself to Tata Sons Private Ltd from Tata Sons Ltd.