India’s Tata Steel has signed a deal with the German group Thyssenkrupp for a joint venture that will create Europe’s second largest steel-maker. The 50-50 joint venture, which will be named Thyssenkrupp Tata Steel, will employ about 48,000 workers, Reuters reported.
The agreement follows the signing of a Memorandum of Understanding in September 2017. The new firm firm will have annual sales of about £13 billion, and the group expects to make costs savings of between £350m and £440m a year, according to the BBC.
The company, based in the Netherlands, will form Europe’s second-largest steelmaker after ArcelorMittal, which was created when Mittal took over Arcelor in 2006.
“The joint venture will create a strong pan-European steel company that is structurally robust and competitive,” Natarajan Chandrasekaran, the chairman of Tata Steel, said in a statement.
“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,” Thyssenkrupp CEO Heinrich Hiesinger said. “The joint venture with Tata Steel is an important milestone for the transformation of Thyssenkrupp to an industrials and service group and will lead to a significant improvement of the financial figures of Thyssenkrupp, effective with closing,” Thyssenkrupp said in a statement. The definite agreement would be signed shortly, it added.
The merger was earlier feared to result in 4,000 job cuts, the BBC report said, adding that workers had been asking for protection of the future of Tata’s UK plant at Port Talbot in south Wales, which employs 4,000 people.
The two companies will now jointly invest in Tata’s Port Talbot facility, according to Bloomberg. All job agreements have been extended till Oct.1, 2026, the report added.
The transaction is subject to merger control clearance in several jurisdictions, including the European Union.
The announcement comes as the European steel makers are facing 25 percent tariff on exports to the United States, which is their biggest market.
The merger, which has been in the works for about a year, had earlier faced criticism in Germany over the decision to move the company headquarters to the Netherlands, and fear of job losses. Thyssenkrupp was also under pressure from some investors like Elliott Management Corp. and Cevian, which wanted the German firm to seek better terms in the deal, since Tata recorded low profits from its European steel ventures.