Tata Steel and Thyssenkrupp plan to create European steel merger

by Dramelin 2:00 AM 0 comments

We are seeing longer effects of higher raw material prices: Thyssenkrupp CFO    2:07 AM ET Fri, 12 May 2017 | 04:13 Tata Steel last month reached a landmark deal that will allow it to reduce 15 billion pounds ($20 billion) in pension liabilities, long seen as the main hurdle in talks between the companies, which have lasted more than a year and a half.
"Under the planned joint venture, we are giving the European steel activities of Thyssenkrupp and Tata a lasting future," Thyssenkrupp CEO Heinrich Hiesinger said.
"We are tackling the structural challenges of the European steel industry and creating a strong No.
" The new company, to be named Thyssenkrupp Tata Steel, will be headquartered in Amsterdam, the companies said in statements on Wednesday after signing a memorandum of understanding (MoU).
"Excellent news," tweeted Dutch Prime Minister Mark Rutte.
The MoU, widely expected after Thyssenkrupp last week said a deal could be reached this month, outlines annual synergies of 400-600 million euros ($480-720 million) as well as up to 4,000 job cuts, about 8 percent of the joint workforce.
"This is a key positive catalyst supporting our thesis that Thyssenkrupp`s core capital goods operations deserve a meaningful rerating," Jefferies analyst Seth Rosenfeld wrote in a note, reiterating his "buy" rating.
Thyssenkrupp also has profitable businesses in elevators and high-tech car parts.
The MoU will be followed by negotiations about the details of the transactions as well as due diligence before a joint venture contract can be signed at the beginning of 2018, Thyssenkrupp said.
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.