Thyssenkrupp, Tata seal European steel deal

Tata Steel shares were trading at Rs 687.3 up by more than 1% since previous close

Tata Steel shares were trading at Rs 687.3 up by more than 1% since previous close

According to the MoU signed by the companies, the new entity which will be called Thyssenkrupp Tata Steel would see up to 4,000 job cuts, about 8 per cent of the joint workforce.

The deal creates a strong and clean balance sheet, coupled with strong products and research and development capabilities to grow, Mr. Chandrasekaran said.

"We believe Thyssenkrupp's medium-term goal is to completely spin-out steel ops, leaving Thyssenkrupp as a near pure-play capital goods business, and today's proposed merger structure is attractively "IPO-able", in our view", Jefferies analyst Seth Rosenfeld said in a note, reiterating his "buy" rating.

The proposed 50:50 joint venture - Thyssenkrupp Tata Steel - would be focused on quality and technology leadership, and on the supply of premium and differentiated products to customers, with annual shipments of about 21 million tonnes of flat steel products.

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Germany's Thyssenkrupp AG (TKAMY) and India's Tata Steel have signed an agreement to merger the two group's steel operations in joint venture that could generate sales of around €15 billion and ignite a stand-off between unions, management and a key activist shareholder.

"This partnership is a momentous occasion for both partners, who will focus on building a strong European steel enterprise", he said.

Thyssenkrupp and Tata Steel are set to create Europe's second largest steel firm.

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Dr Heinrich Hiesinger, chairman of the executive board of Thyssenkrupp, said: "This business combination creates a strong number two and is thus much better positioned to cope with the structural challenges in the European steel industry".

Slaughters is advising longstanding client Tata Steel on the deal, with a team led by M&A partners Robin Ogle and Padraig Cronin, and finance partner Andrew McClean.

Thyssenkrupp will not be liable for any future funding demands of a new pension scheme sponsored by Tata Steel UK, its chief financial officer said.

Shares in Tata Steel closed up 1.7 percent at 687.65 rupees, having earlier hit a high of 691.80 rupees.

"As always, the devil will be in the detail and we are seeking further assurances on jobs, investment and future production" in the United Kingdom, said trade union representative Roy Rickhuss, while adding that workers "recognize the industrial logic of such a partnership".

ThyssenKrupp said the combined companies would start to review its production network in 2020, to identify further savings and integration opportunities.

The deal will require the approval of Thyssenkrupp's supervisory board and Tata Steel's board of directors as well as that of the European Commission.

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