Thyssenkrupp, Tata Steel agree European steel merger

Thyssenkrupp and Indian peer Tata Steel on Wednesday struck a preliminary agreement to combine their European steel operations in a 50-50 joint venture, creating the continent’s No.2 steelmaker after ArcelorMittal.

The new company, to be named Thyssenkrupp Tata Steel, would be headquartered in or near Amsterdam, Thyssenkrupp said in a statement on Wednesday after the two companies signed a memorandum of understanding (MoU).

“Under the planned joint venture, we are giving the European steel activities of Thyssenkrupp and Tata a lasting future,” Thyssenkrupp CEO Heinrich Hiesinger said. “We are tackling the structural challenges of the European steel industry and creating a strong No.2.”

The MoU, widely expected after Thyssenkrupp last week said a deal could still be reached this month, outlines synergies of 400-600 million euros ($480-720 million) a year as well as up to 4,000 job cuts, about 8 percent of the joint workforce.

The MoU will be followed by negotiations about the details of the transactions as well as due diligence - a detailed look at each other’s accounts - before a joint venture contract can be signed at the beginning of 2018, Thyssenkrupp said.

The signing of the joint deal will require the approval of Thyssenkrupp’s supervisory board and Tata Steel’s board of directors as well as that of the European Commission.