A merger between Tata Steel and a German steel giant has been confirmed after months
The Indian conglomerate released a statement to announce a memorandum of understanding (MoU) had been signed with Thyssenkrupp AG to merge its flat steel businesses in Europe.
To be named Thyssenkrupp Tata Steel, the planned joint venture is expected to be formally completed in early next year.
Unions have “cautiously welcomed” the move but it is thought up to 4,000 jobs will still be cut equally from both companies.
The 50/50 joint venture would have a pro forma turnover of about 15 billion Euros per year and currently employs about 48,000 people spread across various locations including more than 700 at Tata’s Colorcoat and Building Systems UK site in Shotton.
It would be headquartered in Amsterdam.
In a statement, both companies said the new venture “would have a robust capital structure” and “would benefit from the scale and distribution network capability of the combined assets to achieve quality, technology and cost leadership in the European steel industry.”
Both partners have confirmed their intent to remain as long term investors and continue the present network configuration of all the upstream hubs in the proposed joint venture company.
Natarajan Chandrasekaran, Tata Steel chairman, said: “The Tata Group and Thyssenkrupp have a strong heritage in the global steel industry and share similar culture and values.
“This partnership is a momentous occasion for both partners, who will focus on building a strong European steel enterprise. The strategic logic of the proposed joint venture in Europe is based on very strong fundamentals and I am confident that Thyssenkrupp Tata Steel will have a great future.”
Dr Heinrich Hiesinger, Thyssenkrupp executive board chairman, added: “Thyssenkrupp and Tata Steel are creating a sustainable future for their respective European steel activities by jointly forming the planned joint venture.
“This business combination creates a strong number 2 and is thus much better positioned to cope with the structural challenges in the European steel industry. With Tata Steel, we have found a partner with a very good strategic and cultural fit. Beyond a clear performance orientation, we also share the same philosophy of corporate responsibility towards employees and society.”
The joint venture had been proposed for months after Tata abandoned proposals mooted in March 2016 to sell off its UK business.
According to Koushik Chatterjee, Tata executive director, Tata Steel, the signing of the MoU will lead to savings of about 400 to 600 million Euros per year.
In addition, there is intent on both sides to improve “capacity utilisation” of the network across the three hubs of IJmuiden in Netherlands, Duisburg, Germany, and Port Talbot and their related downstream facilities – which would include Shotton.
In a document outlining the deal on their website, Thyssenkrupp said “it will not be possible to avoid job cuts.”
“In the joint venture as a whole it is expected that up to 2,000 administrative jobs and possibly up to 2,000 jobs in production will have to be cut in the coming years.
“These cuts would be shared roughly evenly between Thyssenkrupp and Tata.”
Andrew Robb, chairman of Tata Steel Europe, said the announcement marks “the latest step in building a future for Tata Steel’s activities in Europe which is sustainable in every sense.”
Dr Hans Fischer, Tata Steel Europe chief executive, added that the merger would provide “greater long-term sustainability to workers”.
“We will continue to communicate with our employees and inform and consult with works councils and trade unions as these discussions develop,” he said.
The deal to combine the two steel companies is expected to be completed early next year.
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