Indian conglomerate Tata has struck a preliminary deal with German company Thyssenkrupp, initiating a 50-50 joint venture with its European steel operations. The deal does not involve any cash, Tata Steel said. It added that both groups would contribute debt and liabilities to achieve an equal shareholding and remain long-term investors.
Thyssenkrupp CEO Heinrich Hiesinger said, “Under the planned joint venture, we are giving the European steel activities of Thyssenkrupp and Tata a lasting future. We are tackling the structural challenges of the European steel industry and creating a strong No.2 (After ArcelorMittal).” The new company, to be named Thyssenkrupp Tata Steel, will be headquartered in Amsterdam as announced by both the companies in statements released after signing a memorandum of understanding. Both, Tata Steel and Thyssenkrupp said they need to consolidate to address overcapacity in the European steel market, which faces imports from China and elsewhere, subdued demand for construction and inefficient legacy plants.
Negotiations are expected to follow, regarding details of the transactions as well as due diligence before a joint venture contract can be signed in 2018.
