Tata Steel, Thyssenkrupp to merge European flat steel operations

Thyssenkrupp AG's new company logo adorns it's headquarters in Essen Germany in this

Thyssenkrupp AG and Tata Steel Ltd. said Wednesday they have agreed to combine their European steel activities in a move that would create the region's second-largest steel producer.

With this agreement, Tata's plants in the Netherlands and United Kingdom will be combined with Thyssenkrupp's German assets and would be managed through the entity's headquarters in Amsterdam.

Tata employs around 4,000 people in Port Talbot and on Wednesday the two companies said that, over the long-run, the tie-up could result in around 4,000 job losses across the combined groups.

The two companies said they intent to remain as long-term partners and continue the present network configuration of all the upstream hubs in the proposed joint venture.

The MoU will be followed by negotiations about the details of the transactions as well as due diligence before a joint venture contract can be signed at the beginning of 2018, Thyssenkrupp said.

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.

Earlier in the day, the domestic steelmaker announced signing of an agreement with Thyssenkrupp to merge their steel operations in Europe in a 50:50 joint venture company.

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The two companies expect annual synergies of 400-600 million euros.

Shares in Tata Steel rose 2% on news of the deal in Mumbai, while those in ThyssenKrupp opened 5% higher in Frankfurt.

"The steel industry has faced massive challenges in Europe for many years", ThyssenKrupp explained. "As a priority, we will be pressing Tata to demonstrate their long-term commitment to steel-making in the United Kingdom by confirming they will invest in the reline of Port Talbot's Blast Furnace No 5".

"Beyond a clear performance orientation, we also share the same philosophy of corporate responsibility towards employees and society". Under the agreement, both the companies will have 50% stake in the newly formed entity.

"As a priority, we will be pressing Tata to demonstrate their long term commitment to steel making in the United Kingdom by confirming they will invest in the reline of Port Talbot's Blast Furnace No.5".

The future of Tata's business in the United Kingdom, and particularly at its steelworks in Port Talbot, has been uncertain since the Indian company past year said that it meant to sell its British assets.

However of course, as always, the devil will be in the detail and we are seeking further assurances on jobs, investment and future production across the United Kingdom operations.

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