German company ThyssenKrup has confirmed that it is in talks with Tata Steel's UK branch, over a potential tie-up, giving the strongest indication that the German company would help bring a wave of relief to the European steel sector that lies on the verge of ruins.
A spokeswoman for ThyssenKrupp said, "We have repeatedly emphasised that in this situation, we believe a consolidation of the European steel industry is necessary." "Among others, we are also in talks with Tata Steel." She said it was still unclear "when and with whom" such a merger could transpire. Tata had earlier this month, announced that it was in talks with ThyssenKrupp about creating a European flat-steel-products joint venture, prompting the German company's confirmation last week.
A joint venture with Tata will help the German conglomerate to focus on its more profitable and stable capital goods business, which makes elevators, escalators, and supplies components to various industries, including those making cars and wind turbines. Analysts at Deutsche Bank said, "We believe such a deal would be beneficial in principle for both players. Nevertheless, a tie-up including the UK assets could make this much higher risk transaction" for ThyssenKrup.
"The idea that anybody would willingly take on a difficult business, and one with a big pensions scheme, just doesn't make any sense," said John Ralfe, a pensions consultant. "ThyssenKrupp would be bonkers." The Indian company said it was losing $1.3 million a day in Britain amid high costs and a glut of cheap Chinese steel on the global market. Tata's UK assets include a steel plant in Port Talbot, Wales, that employs 4,000 people. The British government said it was willing to take a 25 per cent stake in any rescue of Tata in a bid to save steel jobs.
Group Executive Director Koushik Chatterjee said that "the inclusion of the U.K. business in the potential joint venture would depend on several issues including ... support from the governments of the U.K. and Wales."
