International Steel Mills

Thyssenkrupp, Tata Agree to Merge

Written by Sandy Williams

Thyssenkrupp and Tata Steel have signed a preliminary agreement to merge their European steel activities in a 50/50 joint venture. The new entity will be named Thyssenkrupp Tata Steel and will be based in the Netherlands.

The new company will have a workforce of about 48,000 at 34 locations. Major hubs of operations will be in Duisburg, Germany; IJMuiden, the Netherlands; and Port Talbot, Wales. Thyssenkrupp Tata Steel will come in at second place behind ArcelorMittal as the largest steel company in Europe. The partners hope to close the deal in late 2018.

The company anticipates annual sales of about 15 billion euros, or $18 billion per year, and shipments of 21 million tons annually. The merger will combine all of Tata’s flat steel operations in Europe with Thyssenkrupp’s Steel Europe business. Following the ramp-up phase, the partners expect synergies in the range of $480 million to $720 million per year.

“Under the planned joint venture, we are giving the European steel activities of Thyssenkrupp and Tata a lasting future,” said Dr. Heinrich Hiesinger, CEO of Thyssenkrupp AG. “We are tackling the structural challenges of the European steel industry and creating a strong No. 2.”

A reduction of 4,000 jobs is expected by the partners, with cuts of 2,000 in administration and 2,000 in production to be shared evenly between Thyssenkrupp and Tata.

“The steel industry has faced massive challenges in Europe for many years,” wrote Thyssenkrupp in its announcement of the agreement. “Steel demand is characterized by a lack of dynamic. There is structural overcapacity in supply and constantly high import pressure. This leads to the fact that various stages in the value chain are operating well below capacity. Consequently, all producers are under pressure to fill capacity and are forced to pass on restructuring gains to the market time and again. The result is a downward spiral and a need for restructuring about every three to four years, with major steel assets coming under threat of closure in the medium term.”

Natarajan Chandrasekaran, chairman of Tata Steel, said the company shares similar culture and values. “This partnership is a momentous occasion for both partners, who will focus on building a strong European steel enterprise,” he said. “The strategic logic of the proposed joint venture in Europe is based on very strong fundamentals, and I am confident that Thyssenkrupp Tata Steel will have a great future.”

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