4000 jobs to go as Tata Steel and Thyssenkrupp join forces

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4000 jobs to go as Tata Steel and Thyssenkrupp join forces

Tata Steel Ltd and German major thyssenkrupp AG have signed a memorandum of understanding (MoU) to create a 50:50 joint venture by combining the flat steel businesses of the two companies in Europe and steel mill services of the German company, a top company official said on Wednesday.

The scrip gained 1.64 per cent to close at Rs 687.65 on BSE.

In terms of volume, 6.50 lakh shares of the company were traded on BSE and over 87 lakh shares changed hands at NSE during the day.

Thyssenkrupp CEO Heinrich Hiesinger said, "Under the planned joint venture, we are giving the European steel activities of Thyssenkrupp and Tata a lasting future".

The new entity, to be named ThyssenKrupp Tata Steel, will be headquartered in the Netherlands.

"Tata Steel India is in a strong position to grow faster and set to double its capacity through organic or inorganic route, post deal with Thyssenkrupp", Tata Group Chairman N. Chandrasekaran said on September 20. "We are tackling the structural challenges of the European steel industry and creating a strong No 2".

The joint venture would have a pro forma turnover of about €15 billion per annum (Rs115,000 crore) and now employs about 48,000 people spread across various locations. However, another silver lining about this deal is that the companies will target synergies worth 400-600 million Euros in the coming years.

Roy Rickhuss, the chairman of the steel coordinating committee representing UK unions Unite, GMB and Community, said the unions recognise the industrial logic of the deal, but will still press Tata to confirm it will invest in the relining of Port Talbot's blast furnace No 5. "As a priority, we will be pressing Tata to demonstrate their long-term commitment to steel-making in the United Kingdom by confirming they will invest in the reline of Port Talbot's Blast Furnace No 5".

The scheme, a successor to the BSPS dubbed BSPS II, will be sponsored by Tata Steel UK and its Port Talbot plant.

"This would create the second biggest steel business in Europe which could deliver significant benefits for the UK".

Senior executives from both companies are calling the new business thyssenkrupp Tata Steel (tkTS).

The deal could have sweeping implications for the industry and for 8,000 workers employed in the United Kingdom in particular.

"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.

The 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.

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