Tata Steel Ltd and thyssenkrupp have signed a Memorandum of Understanding to create a European steel enterprise, informed the company in an official statement released on Wednesday (20 September).
The proposed 50:50 joint venture – thyssenkrupp Tata Steel, would have a pro forma turnover of about Rs 115,000 crore per annum and currently employs about 48,000 people spread across various locations.
The joint venture would be focused on quality and technology leadership, with annual shipments of about 21 million tones of flat steel products to customers.
The proposed combination of businesses would be formed through a non-cash transaction framework, and would be headquartered in the Amsterdam region of the Netherlands.
N Chandrasekaran, Chairman, Tata Steel said, “As our partnership with thyssenkrupp progresses in Europe, Tata Steel is well positioned to leverage India’s growing economy by adding significant capacity in value added products to meet emerging customer needs. Tata Sons would continue to financially support Tata Steel’s strategy for capacity expansion through organic and inorganic growth opportunities in India.”
“This business combination creates a strong number 2 and is thus much better positioned to cope with the structural challenges in the European steel industry,” said Dr Heinrich Hiesinger, Chairman, Executive Board, thyssenkrupp.
Through the combination, both companies would benefit from significant synergies. In the early years, these synergies would primarily derive from an integration of sales and administration, research and development, a joint optimization of procurement, logistics and service centers.
Thyssenkrupp Tata Steel would seek to improve capacity utilization of the network across the three hubs of Ijmuiden (Netherlands), Duisburg (Germany) and Port Talbot (Wales, UK) and their related downstream facilities.
Koushik Chatterjee, Group Executive Director, Tata Steel, said, “Based on our initial assessment, cost synergies in the range of €400 to €600 million per annum may be realized through integration of commercial functions, R&D and other supporting activities.”
“The proposed transaction in Europe also paves the way for significant de-leveraging of the Tata Steel Group’s consolidated balance sheet and provides the platform for Tata Steel to pursue future growth.”