Tata Steel and German conglomerate Thyssenkrupp have decided to call off their steel joint venture (JV), expecting the deal to be rejected by the European Commission over competition concerns. The JV, announced in September 2017, was supposed to create Europe’s second largest steel company with a turnover of 15 billion euros, behind ArcelorMittal. The deal was expected to stabilise and cut down the debt of the Tatas’ loss-making European steel business. The collapse of the JV is a setback to Tata Group chairman N Chandrasekaran’s restructuring initiatives.
The European Commission will announce its decision by June 17. Tata Steel and Thyssenkrupp had tried to offer “significant concessions” to assuage the commission’s concerns, but those didn’t help. If further commitments were made, then it would “affect the basic foundation” of the venture, making it uneconomical, Tata Steel said. The commission was expecting substantial concessions in the form of sale of assets of the JV.
With the merger now abandoned, Tata Steel said it will work towards improving the performance of Corus besides exploring other options for the unit (which is now known as Tata Steel Europe). The focus is to make the European operations cashpositive this year, said Tata Steel CEO T V Narendran.
Tata Steel acquired Corus for $13 billion in 2007, which marked its foray into Europe and which was the biggest merger & acquisition by an Indian corporate at that time. The acquisition, however, never made money for Tata Steel and it had to write off billions of dollars due to losses. The company subsequently started divesting its European assets in parts and was left with the plants in Ijmuiden (Netherlands) and Port Talbot (UK). These plants were supposed to be part of the JV with Thyssenkrupp.
The latest development leaves a question mark on the future of Tata’s European steel plants, which require investments. The European Works Council, which represents Corus’s 20,000-plus workers, said that it is vital that the footprint of Tata Steel Europe is kept intact and would strongly oppose any attempts to break up the company. “Tata Steel must now reflect and engage fully with employee representatives before deciding where we go from here.”