Thyssenkrupp, Tata Steel seal landmark steel joint venture deal

FRANKFURT / DUESSELDORF (Reuters) – Germany's Thyssenkrupp and India's Tata Steel signed a final agreement on Saturday to establish a long-expected steel joint venture, the European steel industry's biggest shake-up in a decade.

The final agreement comes after months of negotiations. Both companies hope to respond to challenges in the volatile steel industry, including overcapacity.

The largest deal in Europe's steel industry since the takeover of Arcelor by Mittal in 2006, the 50-50 joint venture – to be named Thyssenkrupp Tata Steel – will have about 48,000 workers and about 17 billion euros (15.04 billion pounds) in dirty.

Based in the Netherlands, it will be the continent's second-largest steelmaker after ArcelorMittal. It forms the core of Thyssenkrupp CEO Heinrich Hiesinger's plan to turn his steel-to-submarine conglomerate into a technology company.

"The joint venture not only addresses the challenges of the European steel industry," Hiesinger said. "

Tata Steel Chairman, Natarajan Chandrasekaran, in a separate Thyssenkrupp and Tata Steel, which is one of the most important solutions in the world. statement, said the joint venture will create "a strong pan- European steel company that is structurally robust and competitive".

The deal comes as the European steel makers face 25 percent of their exports to the United States, their biggest market. That might be more than a result.

Since the tariffs were announced in late May, shares in European steelmakers ArcelorMittal, Thyssenkrupp, Salzgitter and Voestalpine have lost 8 to 17 percent.

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Tata Steel, whose European business has performed worse than Thyssen's since the agreement was first announced, creating a valuation gap.

Thyssenkrupp said the deal included "proper compensation" for the gap, which said it was in the mid-triple-digit million-euro range: if the joint venture makes a large profit, it would have a bigger share of the proceeds.

Thyssenkrupp place, adding the joint venture was favoring for a dividend payout in the low-to-mid-triple-digit million-euro range.

The German group also said it expects annual synergies of 400 million to 500 million euros from the transaction. It said additional synergies were possible through managing capital expenditure and optimizing capital working.

Tata Steel will remain liable for environmental risks in Britain, where its Port Talbot factory, the least profitable of the joint venture, is based, said Markus Grolms, vice chairman of Thyssenkrupp's supervisory board.

He also said that Tata Steel's Dutch unit would be part of the joint venture's cash-pooling mechanism. That had been a key demand for German workers that Tata would give their own workers better conditions in the new company.

"Yes, we do not want to protect people. But we also want a company with better chances and less risks, "Grolms said.

Thyssenkrupp's management will present a refined strategy to its supervisory board in the second week of July. Sources said that it may include a number of materials.