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Based in the Netherlands, Thyssenkrupp-Tata Steel will be the second largest steelmaker on the continent after ArcelorMittal Photo: Reuters
Frankfurt / Duesseldorf: Thyssenkrupp AG and the Indian Tata Steel Ltd have signed Last Saturday a definitive agreement for the creation of a long-awaited steel joint venture, the biggest reshuffle of the European steel industry for more than a decade. Both companies hope this will help them meet the challenges of the volatile steel industry, including overcapacity.
The largest transaction of the European steel industry since the resumption of Arcelor by Laxmi Niwas Mittal in 2006, the joint 50-50 Thyssenkrupp Tata Steel, which will have about 48,000 workers and about 17 billion dollars ($ 19.9 billion) in turnover, will be based in the Netherlands. second steel plant after ArcelorMittal. It is the heart of Thyssenkrupp CEO Heinrich Hiesinger's plan to turn his steel conglomerate into a technology-based submarine company.
"The joint venture is not content to meet the challenges of the European steel industry". "This is the only solution to create significant added value of around 5 billion euros for Thyssenkrupp and Tata Steel because of joint synergies that can not be achieved in a stand-alone scenario."
Natarajan Chandrasekaran, President of Tata Steel, According to the statement, the joint venture will create "a solid, structurally sound and competitive pan-European steel company".
The agreement comes as European steelmakers face tariffs of 25% on their exports to the United States, their largest market. This could force the local market to absorb more volume as a result.
Since the announcement of tariffs at the end of May, the shares of European steelmakers ArcelorMittal, Thyssenkrupp, Salzgitter and Voestalpine have lost 8% -17%.
New Terms
Hiesinger was forced by activist shareholders Cevian and Elliott to obtain further commitments from Tata Steel, whose European activities were worse than those Thyssenkrupp since the announcement of the agreement, creating a valuation gap. The joint venture agreement provided for "appropriate compensation" for the spread, which was in the range of $ 3 million: if the joint venture made a widely anticipated initial public offering, it will receive a largest share of the proceeds
Thyssenkrupp also ensured the right to decide when a listing could take place, adding that the joint venture was aiming for a dividend in the low-to-three-mid-digit of millions of euros
The German group also said that it is now expecting annual synergies of 400 to 500 million euros from the transaction. Tata Steel will remain responsible for environmental risks in Britain, which has its Port Talbot plant, the least profitable of the joint venture, said Markus Grolms. Vice-Chairman of the Supervisory Board of Thyssenkrupp.
He also stated that the Dutch unit of Tata Steel would be part of the cash pooling mechanism of the joint venture. It had been a key requirement for the concerned German workers that Tata would give his own workers better conditions in the new venture. "Yes, we want to protect people, but we also want a business with better chances and less risk," said Grolms.
Thyssenkrupp management will present a refined strategy to its supervisory board during the second week of July. People familiar with the case said that this could include a sale of its materials service unit and further cost reductions.
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