Tata Steel, thyssenkrupp AG sign MoU for their European steel assets

Tata Steel and thyssenkrupp AG have signed a Memorandum of Understanding (MoU) in 50:50 joint venture for their European assets.

The flat steel business of the two companies in the Europe will be combined along with thyssenkrupp's steel mill services.

"The proposed 50:50 joint venture - thyssenkrupp Tata Steel - would be focused on quality and technology leadership, and the supply of premium and differentiated products to customers, with annual shipments of about 21 million tonnes of flat steel products," Tata Steel said in a press release.

"The proposed combination of businesses would be formed through a non-cash transaction framework, based on fair valuation where both shareholders would contribute debt and liabilities to achieve an equal shareholding in the venture," the release added.

The joint venture will have a turnover of 15 billion euros per annum, or nearly Rs 1,15,000 crore. The company will be headquartered in Amsterdam, Netherlands.

Cost synergies for the company is expected to be in the range of 400-600 million euro per annum, as per the initial assessment.

"Cost synergies may be realized through integration of commercial functions, R&D and other supporting activities," Koushik Chatterjee, Group Executive Director, Tata Steel said.

The process will now move to the next phase in the transaction with due diligence and negotiations on the definitive detailed agreements.

thyssenkrupp Tata Steel would also look at improving capacity utilisation of the network accross three hubs - IJmuiden in Netherlands, Duisburg in Germany and Port Talbot in UK and their related facilities.

"This partnership is a momentous occasion for both partners, who will focus on building a strong European steel enterprise. The strategic logic of the proposed joint venture in Europe is based on very strong fundamentals and I am confident that thyssenkrupp Tata Steel will have a great future," N Chandrasekaran, Chairman, Tata Steel said.

The JV is also likely to deleverage Tata Steel Group's consolidated balance sheet and provide the 'platform for Tata Steel to pursue future growth.