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Tata, ThyssenKrupp Announce Merger Plan

Friday, September 22, 2017

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Two major global steelmakers announced Wednesday (Sept. 20) that they plan to combine their flat steel businesses into a joint venture unit that they say will ship 21 million tons of product each year.

According to the plan, Tata Steel Limited—a subsidiary of the Mumbai-based Tata Group—and ThyssenKrupp AG (Duisburg and Essen, Germany) will combine forces to form ThyssenKrupp Tata Steel, a flat steel supplier that will be based in Amsterdam. The new company will be a 50-50 joint venture, the firms say.

By the Numbers

The deal is still subject to regulatory approvals, but would reportedly create Europe’s second-largest steel producer, after Luxembourg-based ArcelorMittal. According to the firms, the new venture would have a pro forma turnover of 15 billion pounds—about $20.3 billion—each year. The combination would take the form of a non-cash transaction.

Port Talbot Works
By Grubb, Public Domain, via Wikimedia Commons

Tata Steel, owner of the Port Talbot Steel Works, in Wales (pictured), plans to merge its flat steel business with German firm ThyssenKrupp.

The units to be merged currently employ 48,000 people, the companies said. But the joint venture will likely result in layoffs; officials reportedly predict as many as 4,000 jobs will be lost in the coming years as the joint venture is finalized. While the companies say layoffs are inevitable given the current overcapacity in the market, some German government officials have come out in opposition to the deal, which comes on the eve of elections in that country.

According to Reuters, Germany’s Labor Minister, Andrea Nahles, said that there “must not be a merger at any price. The sites in Germany must be maintained and compulsory redundancies must be ruled out.” She also insisted that if a merger goes through, the company’s headquarters must be in Germany, not the Netherlands.

Months in the Making

The idea of a merger between the two firms was first discussed more than a year ago. Both companies said in July 2016 that they were exploring merger options with one another and with other players in the industry.

Tata grew to become one of the largest steel producers in the world when it acquired the much larger Corus, based in the U.K. and the Netherlands, in 2007. Last year, the steelmaker threatened to sell the Port Talbot Steel Works, the largest steel operation in the U.K., but later abandoned the idea. The merger with ThyssenKrupp is viewed in the U.K. as an additional security measure for the Port Talbot facility despite the promise of overall job cuts.

   

Tagged categories: AS; Asia Pacific; EMEA (Europe, Middle East and Africa); EU; Latin America; Mergers; NA; North America; Program/Project Management; SA; Steel; Tata Steel; ThyssenKrupp

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