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Thyssenkrupp and Tata Steel sign MOU to merge European operations
release time :2017-09-20 16:41:31 page view:568

Sep. 20, 2017 - Germany’s Thyssenkrupp and India’s Tata Steel have reached an understanding to merge their European operations to create the continent’s number two steel producer after ArcelorMittal. 


After more than a year of talks, a memorandum of understanding was announced early Wednesday morning by Thyssenkrupp, just weeks after Tata removed a central obstacle by agreeing with UK regulators to hive off a pension scheme for its British business. 


The MOU calls for a 50/50 joint venture that would produce annual synergies of between €400m and €600, Thyysenkrupp said. 

After a period of due diligence to examine each other’s books, the two groups expect to sign a formal merger at the start of 2018, and complete the merger by the end of next year. 


Combined, the new company would generate pro forma sales of €15bn and employ some 48,000 people at 34 locations. The group would ship 21m tonnes of steel per year. 


Heinrich Hiesinger, Thyssenkrupp chief executive who has been pushing the deal and getting reluctant labour unions on board, said a merger would offer both companies a sustainable future and tackle the structural challenge facing a European steel sector suffering from overcapacity. 


The announcement ends the uncertainty around Tata Steel’s UK business that began in March last year, when the company said it would seek a disposal of the business after a string of heavy losses. That decision was taken under Cyrus Mistry, who was sacked as chairman of group holding company Tata Sons in October. 


His successor Natarajan Chandrasekaran said that the new business would be based on “very strong fundamentals”, while stressing that Tata Sons would now look to support Tata Steel’s expansion in its home market of India. 


Koushik Chatterjee, Tata Steel’s executive director, said that the tie-up would yield annual cost synergies of about €400-600m, while enabling a “significant de-leveraging” of Tata Steel’s balance sheet.

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