In a landmark deal, Tata Steel and Thyssenkrupp AG of Germany on Saturday signed the final agreement to combine their European steel businesses in a 50-50 joint venture in a new company. The proposed new company, to be named Thyssenkrupp Tata Steel BV, will be positioned as a leading pan European high quality flat steel producer with a strong focus on performance, quality and technology leadership. It will have around 48,000 workers and about 17 billion euros ($19.9 billion) in sales. Based in the Netherlands, it will be Europe’s second-largest steelmaker after ArcelorMittal.
However, in case of an Initial Public Offering (IPO) of the joint venture, Thyssenkrupp will receive a higher share of the proceeds, reflecting an economic ratio of 55/45 in favour of Thyssenkrupp. Furthermore, Thyssenkrupp has the right to exclusively decide on the timing for a potential IPO.
The joint venture will be managed as one integrated business through a holding company headquartered in the Amsterdam region of the Netherlands. Thyssenkrupp Tata Steel will have a two-tier governance structure that comprises a Supervisory Board and a Management Board each with six members, on which Thyssenkrupp and Tata Steel will have equal representation. In the time ahead, the German firm and Tata Steel will jointly make decisions on the leadership team and their responsibilities, the German firm said in a statement.
“The joint venture is built on the strong foundations of common value systems and a long heritage in the industry,” Tata Steel said in a statement. The transaction is subject to merger control clearance in several jurisdictions, including the European Union. The deal comes after months of negotiations since an initial agreement was announced in September 2017.
Natarajan Chandrasekaran, Chairman of Tata Steel, said: “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. We are confident that this company will create value for all stakeholders.”
Heinrich Hiesinger, CEO of Thyssenkrupp AG, said: “we will create a highly competitive European steel player – based on a strong industrial logic and strategic rationale. We will secure jobs and contribute to maintaining value chains in European core industries.” Until completion of the JV process, Thyssenkrupp Steel Europe and Tata Steel in Europe still operate as separate companies and as competitors. Only after completion of the JV process, Thyssenkrupp Steel Europe and Tata Steel in Europe will be integrated as one company.
The JV will be positioned as a leading pan European high quality flat steel producer with a capacity of approximately 23.4 million tonnes. It combines the businesses of Tata Steel Europe and Thyssenkrupp Steel Europe as well as Thyssenkrupp’s Mill Services business with integrated steel making facilities across Germany, Netherlands and the UK. The new company will have a long term external debt of around 2.5 billion euros (subject to completion of accounts) compared to a proforma Ebitda (including estimated synergies of approximately 400 to 500 million euros) of around 2 billion euros per annum in the next 2-3 years.
Thyssenkrupp Seller has agreed to contribute its entire shareholding in Thyssenkrupp Dritte and Thyssenkrupp Second Participations to the JV in consideration for which Thyssenkrupp will be entitled to 50 per cent of the share capital of the venture.