The probe will check if the JV will reduce competition in the European steel market
The European Union probe of the joint venture between Tata Steel's European unit and thyssenkrupp could eventually lead to the sale of one or more assets under the new company, to clear the regulatory hurdle.
The "in-depth investigation" will review if the joint venture will reduce competition in the sector, especially in the niche segments that the joint venture will dominate.
In a similar review, ArcelorMittal had to sell plants in four countries earlier this year to clear its proposal to acquire Italy's largest steel company Ilva.
"Facilities of both the companies - Tata Steel Europe and thyssenkrupp - specialise in flat steel. It is very possible that the European Union will ask them to divest some of their assets," said a senior executive from the industry.
"If the JV is asked to divest facilities, then Port Talbot could be done," added the executive.
Port Talbot in Wales hosts UK's biggest steel facility owned by Tata Steel Europe.
The in-depth investigation is the second stage of the review, which was initially opened in September. The final verdict could come in two months.
The joint venture will emerge as the second largest steelmaker in Europe, after ArcelorMittal, with annual revenues of 17 billion euros and production of 21 million tons.
Including Ilva's facility, ArcelorMittal would have a market share of 40 percent in three products, hot rolled steel, cold rolled steel and galvanised steel. This had prompted the European Commission to begin a review of the proposed acquisition.
To clear the acquisition, ArcelorMittal sold its plants in Czech Republic, Romania, Macedonia and Italy to Liberty House, the UK -based group owned by Sanjeev Gupta.
The joint venture between Tata Steel Europe and thyssenkrupp will not be as dominant as ArcelorMittal. According to a report in Financial Times, the joint venture will have a 27 percent share in Europe's flat steel market.
But the share could increase considerably if sub-segments of the steel market is considered. The Commission has identified three of these segments - automotive steel, coated steel used for packaging and electrical steel.The Port Talbot facility makes steel used in the automotive and packaging industries.