Indian steelmaker Tata Steel and German multinational conglomerate ThyssenKrupp signed a preliminary deal on Wednesday to merge their European steel operations, Reuters reported. The deal would make the resulting joint venture entity the second-largest steelmaker in Europe after ArcelorMittal.
Tata Steel officials said that both companies would contribute debt and liabilities to achieve an equal shareholding in the new joint venture. Thus, there would be no cash payment.
The companies said they need to consolidate to address production above selling capacity in the European steel market. “No one is able to solve the structural issues in Europe alone,” said ThyssenKrupp CEO Heinrich Hiesinger. “We all suffer from overcapacity and that means that everyone is making the same restructuring efforts. We want to avoid our steel team restructuring itself to death. Thus, the company has decided to opt for a merger.”
Tata Group Chairperson N Chandrasekaran said the deal would help the company grow at a higher speed. “Tata Steel India is in a strong position to grow faster and set to double its capacity through organic or inorganic [steel] route, post its deal with Thyssenkrupp,” PTI quoted Chandrasekarana as saying.