India's Tata Steel and German major Thyssenkrupp AG have signed a memorandum of understanding (MoU) on Wednesday to build Europe's ssecond largest steel enterprises, Tata Steel said in a filing in Bombay Stock Exchange (BSE).
"The proposed 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, " the companies said in a statement.
With this agreement, Tata's plants in the Netherlands and UK will be combined with Thyssenkrupp's German assets and would be managed through the entity's headquarters in Amsterdam.
"The joint venture would have a pro forma turnover of about €15 billion per annum (Rs1,15,000 crore). It currently employs about 48,000 people spread across locations and would be headquartered in Amsterdam, the Netherlands," the release said.
Commenting on the deal, Tata Steel chairman N Chandrasekaran said, "The Tata Group and Thyssenkrupp have a strong heritage in the global steel industry and share similar culture and values. 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."
"This business combination creates a strong number 2 and is thus much better positioned to cope with the structural challenges in the European steel industry. With Tata Steel, we have found a partner with a very good strategic and cultural fit. Beyond a clear per performance driven orientation, we also share the same philosophy of corporate responsibility towards employees and society," said Heinrich Hiesinger chairman, executive board, Thyssenkrupp.
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, Tata Steel said in the release.
Thyssenkrupp in a press statement added the negotiating parties will give each other access to confidential business to the extent permissible between competitors. "It is envisaged to sign a contract in early 2018," the company added.
