Long-awaited news of a deal between Tata Steel Limited and thyssenkrupp AG has finally surfaced after months of speculation.
Quality and technology leadership and the supply of premium and differentiated products will form the backbone of a planned 50:50 joint venture between the two steel giants.
Senior executives from both companies are calling the new business thyssenkrupp Tata Steel (tkTS).
After months of media speculation, the two companies have signed a Memorandum of Understanding to create ‘a leading European steel enterprise by combining the flat steel businesses of the two companies in Europe and the steel mill services of the thyssenkrupp group’.
It is estimated that the new business will make annual shipments of around 21Mt/yr of flat steel products and will have a pro forma turnover of about EUR15 billion per annum.
Headquartered in the Amsterdam region of the Netherlands the company will employ 48,000 people.
N. Chandrasekaran, chairman of Tata Steel, said that both companies have a strong heritage in the global steel industry and share similar culture and values. He described the partnership as a ‘momentous’ occasion and said that the strategic logic of the proposed JV was based on very strong fundamentals.“I am confident that thyssenkrupp Tata Steel will have a great future,” he said.
Dr. Heinrich Hiesinger, chairman, executive board, thyssenkrupp, said that both businesses were creating a sustainable future for their respective European steel activities, creating ‘ a strong number two’ on the global stage, capable of coping with the structural challenges of the European steel industry.
“With Tata Steel, we have found a partner with a very good strategic and cultural fit,” Dr. Hiesinger said, adding that both companies shared the same philosophy of corporate responsibility towards employees and society.
As the partnership between the two companies progresses, Tata Steel is ‘well-positioned’ to leverage India’s growing economy by adding significant capacity in value-added products to meet emerging customer needs, said Mr Chandrasekaran. “Tata Sons would continue to financially support Tata Steel’s strategy for capacity expansion through organic and inorganic growth opportunities in India,” he said.
Koushik Chatterjee, group executive director, Tata Steel, said the deal was an ‘important milestone’ for Tata Steel Group in terms of its wider European portfolio strategy. He argued that cost synergies in the range of EUR400 to EUR600 million per annum may be realised through the integration of commercial functions, R&D and other supporting activities.
The new company will seek to improve capacity utilisation across its three hubs – Ijmuiden in the Netherlands, Duisburg in Germany and Port Talbot in the UK, not forgetting their related downstream facilities.
Going forward the plan will be to execute due diligence procedures and finalise final agreements and corporate authorisations.