Thyssenkrupp, Tata seal European steel deal

Robyn Valdez
September 21, 2017

India's Tata Steel has paved the way for a merger of its European operations with the German steel manufacturer ThyssenKrupp, creating Europe's second largest steel group after ArcelorMittal.

Tata Steel cleared a hurdle for the venture after a United Kingdom regulator approved a deal to solve a long-running pension standoff, which Thyssenkrupp CEO Hiesinger had said was potentially a major stumbling block to the combination.

The joint venture has a workforce of about 48,000 at 34 locations but the partners expect that 2,000 jobs in administration and up to 2,000 jobs in production will have to go.

IG Metall union, which represents metalworkers in Germany, is concerned the joint venture could pave the way for ThyssenKrupp to exit the steel business entirely. 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.

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Holding half of the 20 seats on Thyssenkrupp's supervisory board, any change in tone among labour representatives is closely watched ahead of a September 23 meeting of the committee, where the plans will be discussed.

The two firms said that in the years after the deal is completed, they will focus on "leveraging synergies".

The companies' said in a statement that the merger would create cost synergies in the range of €400 to €600m per year.

While Tata Steel's pre-market trade was merely up 0.7 percent in India, Thyssenkrupp's shares were indicated to have been gone up by more than 5 percent in Germany.

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Slaughters is advising longstanding client Tata Steel on the deal, with a team led by M&A partners Robin Ogle and Padraig Cronin, and finance partner Andrew McClean.

The deal could have sweeping implications for the industry and for 8,000 workers employed in the United Kingdom in particular. "Beyond a clear per performance driven orientation, we also share the same philosophy of corporate responsibility towards employees and society", said Heinrich Hiesinger chairman, executive board, Thyssenkrupp.

Thyssenkrupp will not be liable for any future funding demands of a new pension scheme sponsored by Tata Steel UK, its chief financial officer said.

"In case that in the future developments would be that they would be underfunded, then the sponsor would still be Port Talbot, or Tata Steel UK, to overcome this issue", he told analysts on Wednesday.

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The deal will require approval of Thyssenkrupp's supervisory board, Tata Steel's board of directors and European regulators.

Other reports by Info About Network

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