Tata Steel deal crystallises overseas M&A pain

Dow, S&P 500, Nasdaq edge up to new record peaks

The new company, to be named Thyssenkrupp Tata Steel, will be headquartered in Amsterdam, the companies said in statements on Wednesday after signing a memorandum of understanding (MoU).

The proposed 50:50 joint venture would have a turnover of about €15 billion (Rs115,000 crore) and now employs about 48,000 people spread across various locations.

"Those impacts shall be jointly shared between both partners", the companies said.

"The Tata Group and Thyssenkrupp have a strong heritage in the global steel industry and share similar culture and values".

The merger would be through a non-cash transaction framework based on fair valuation where both shareholders would contribute debt and liabilities to achieve an equal shareholder in the venture.

Segerath, however, said that negotiations would be hard and that the council continued to reject the idea of a merger, which would create Europe's No.2 steel group after ArcelorMittal (MT.AS), demanding that other options will also be discussed.

Earlier in the day, the domestic steelmaker announced signing of an agreement with Thyssenkrupp to merge their steel operations in Europe in a 50:50 joint venture company.

The two foresee annual synergies of 400 million €($480 million) to €600 million, helped by savings on areas including capacity utilisation, sales and administration and research and development.

Dow, S&P 500, Nasdaq edge up to new record peaks

Shares of Tata Steel were trading higher by 0.74 percent at 681.55 on BSE.

"The steel industry has faced massive challenges in Europe for many years", ThyssenKrupp explained.

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

"As always, the devil will be in the detail and we are seeking further assurances on jobs, investment and future production across the United Kingdom operations", Roy Rickhuss, chair of the committee, told the BBC.

In addition to this, Thyssenkrupp Tata Steel would seek to improve capacity utilisation of the network across the three hubs of IJmuiden (the Netherlands), Duisburg (Germany) and Port Talbot (Wales, UK) and their related downstream facilities.

"As a priority, we will be pressing Tata to demonstrate their long term commitment to steelmaking in the United Kingdom by confirming they will invest in the reline of Port Talbot's Blast Furnace No 5".

Any deal is still subject to approval by Thyssenkrupp's supervisory board and Tata Steel's board of directors as well as that of the European Commission.

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