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Bloomberg (File photo) / Tata Steel’s proposed 50:50 joint venture with Thyssenkrupp will combine Tata’s plants in the Netherlands and the UK with Thyssenkrupp’s German assets. Tata Steel and Thyssenkrupp have been in talks for over a year.
Tata Steel Ltd and German major Thyssenkrupp AG have signed a memorandum of understanding (MoU) to create Europe’s second-largest steel enterprise by combining the flat steel businesses of the two companies.
In a statement released on Wednesday, the companies said, “The proposed 50:50 joint venture—Thyssenkrupp Tata Steel—would be focused on quality and technology leadership, and the supply of premium and differentiated products to customers, with annual shipments of about 21 million tonnes of flat steel products.”
The deal involves combining Tata’s plants in the Netherlands and the UK with Thyssenkrupp’s German assets and would be managed through a lean holding company based in the Netherlands. This entity will rival Europe’s top producer, ArcelorMittal.
The joint venture would have a pro forma turnover of about €15 billion per annum (Rs1,15,000 crore). It currently employs about 48,000 people spread across locations and would be headquartered in Amsterdam, the Netherlands.
Commenting on the MoU, Tata Steel chairman N. Chandrasekaran said: “The Tata Group and Thyssenkrupp have a strong heritage in the global steel industry and share similar culture and values. 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.”
The proposed combination of businesses would be formed through a non-cash transaction framework, based on fair valuation where both shareholders would contribute debt and liabilities to achieve an equal shareholding in the venture, Tata Steel said.
“Thyssenkrupp Tata Steel would have a robust capital structure that is well matched by the underlying free cash flows of the company. It would benefit from the scale and distribution network capability of the combined assets to achieve quality, technology and cost leadership in the European steel industry,” added Tata Steel.
Thyssenkrupp and Tata Steel have been in talks for over a year.
Thyssenkrupp in a press statement added that the negotiating parties will give each other access to confidential business to the extent permissible between competitors. “It is envisaged to sign a contract in early 2018,” the company added.
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