Tata Steel and ThyssenKrupp AG on Saturday signed definitive agreements to combine their European steel businesses in a 50/50 joint venture in a new company.
This follows the signing of a Memorandum of Understanding in September 2017.
The new company will be called ThyssenKrupp Tata Steel BV, and will be based in Netherlands. The merged entity will have capacity to produce 21 million tons of steel a year, making it the second largest steelmaker in Europe after ArcelorMittal.
ThyssenKrupp Tata Steel BV will have 48,000 employees across 34 sites. The company will have a revenue of about Euros 15 billion.
The combined entity is expected to make an annual savings of up to Euros 500 million.
The transaction is subject to merger control clearance in several jurisdictions, including the European Union.
“The joint venture will create a strong pan European steel company that is structurally robust and competitive. This is a significant milestone for Tata Steel and we remain fully committed to the long-term interest of the joint venture company," said Natarajan Chandrasekaran, Chairman of Tata Steel.
Dr. Heinrich Hiesinger, CEO of ThyssenKrupp AG, added, "We will secure jobs and contribute to maintaining value chains in European core industries.”
A statement from Tata Steel said that the two European entities will continue to function as separate companies until the completion of the JV process.
While the JV gives equal shareholding to the two companies, ThyssenKrupp will get a bigger share from the proceedings out of an expected IPO of the JV.
This comes after demands from workers union and shareholders of the Germany company that Tata Steel needs to compensate for the differing performance of the two companies since September last year. While Tata Steel's EBITDA has declined by a fifth, that of its German partner has increased by a third since the announcement of the deal last year.
Reports said that the deal would include a compensation for ThyssenKrupp, but the details are awaited.
The two sides also declined to give a timeline for the completion of the JV process, but it is widely expected to get over by December.
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