MUMBAI: The 50:50 joint venture (JV) signed between Tata Steel and thyssenkrupp in June last year to create a pan-European collaboration by combining the businesses of both the companies is off the table now, after the European Commission indicated that it is unlikely to clear the deal.
“Based on the feedback received from the commission, it is increasingly clear that the commission is not intending to clear the proposed joint venture as it expects substantial remedies in the form of sale of assets of the proposed venture,” Tata Steel said in a statement.
Tata Steel’s share price closed 6 per cent down on Friday at Rs 487.30 on the news. The proposed JV was one of the ways the company devised to deleverage the European steel business that was weighing on its consolidated balance sheet.
In a conference call, the company said it will continue to explore opportunities to deleverage; and the aim is to cut the debt by 1 billion Euros from 2.2 billion Euros at present. It would also look at monetisation of assets to pare debt on the European business.
“Tata Steel remains committed to the above strategy and would explore all options to achieve similar outcomes in the future. Currently, around two-third of Tata Steel’s business is India-based with best-in-class competitiveness and a focused growth strategy,” Tata Steel said. At the time the Corus was acquired, it was four times the domestic business, but with the expansion of domestic business, including some recent acquisitions, it has grown larger.
Tata Steel said that both the companies, based on the objections received from the European Commission, tried to put together a comprehensive package of remedies, but the reply from the commission indicates that the remedies have not been able to get the proposal cleared. “The remedies offered were developed considering the overall industrial strategy for the proposed joint venture, the integrated and complex nature of the supply chain to service customers and the need to build a sustainable business that would be able to endure the structural challenges faced by the European steel industry,” it said.
Any further commitment over and above that, it said, would adversely affect the basic foundation of the proposed JV and its sustainability. “Hence, both the partners are unable to offer any further remedies to the commission to meet its requirements,” Tata Steel said.
Tatas had bought Corus Group Plc for about $13 billion in 2007, but after the 2008 financial meltdown, it has been shutting and selling old Corus steel mills in Great Britain. The only plant it has kept back is the Port Talbot steel plant.
Moving on
Tata Steel on Friday said it will continue to explore opportunities to deleverage; the aim is to cut the debt
by 1 billion Euros from 2.2 billion Euros at present.