Tata Steel-Thyssenkrupp deal: Why this European deal is shot in arm for Tata Steel’s India business

By: | Published: July 3, 2018 11:27 AM

The latest signed joint venture between Tata Steel Europe and Germany’s ThyssenKrupp will help in paring the Indian parent’s debt.

tata steel, bhushan steel takeover, tata steek investment, tata steel india, tata steel annual report,  tata steel assets, industry news, tata steel business, tata joint venture, tata steel newsThe latest signed joint venture between Tata Steel Europe and Germany’s ThyssenKrupp will help in paring the Indian parent’s debt. (Reuters)

The latest signed joint venture between Tata Steel Europe and Germany’s ThyssenKrupp will help in paring the Indian parent’s debt. “Because Europe becomes stronger, it reduces our leverage,” PTI reported citing Tata Steel Chairman N Chandrasekaran. On Saturday, Tata Steel and ThyssenKrupp signed a deal after months of negotiations to form Europe’s second biggest steel company in which Tata and ThyssenKrupp will have a 50:50 partnership.

“(The deal) allows Indian operations to grow and address the Indian market,” PTI reported him saying. The deal will allow Tata Steel to transfer up to 2.6 billion euros ($3 billion) of debt on its European business to the joint venture company, relieving the Indian parent from substantial interest payments, PTI reported him saying.

“Thyssenkrupp Tata Steel JV will be a formidable European Steel major, combining the strengths of both partners in the areas of research & development, product & service innovation, market access, customer relationships and talent. The JV is likely to derive cost synergies primarily from procurement, business enablement and other SG&A costs, while over a longer period, capex  and working capital integration should help conserve cash significantly. In times of lingering surplus capacity in Europe and growing disruptions in global trade frameworks, the combined strength should enhance sustainability of the business,” Anjani K Agrawal, Partner and Global Steel Leader, EY said.

About the deal

The largest deal in Europe’s steel industry since the takeover of Arcelor by Mittal in 2006, the 50-50 joint venture – to be named Thyssenkrupp Tata Steel – will have about 48,000 workers and about 17 billion euros ($19.9 billion) in sales, Reuters reported. Notably, the mega venture will be based in the Netherlands, making it the continent’s second-largest steelmaker after ArcelorMittal.

“The joint venture not only addresses the challenges of the European steel industry. It is the only solution to create significant additional value of around 5 billion euros for both Thyssenkrupp and Tata Steel due to joint synergies which cannot be realized in a stand-alone scenario,” Thyssenkrupp CEO Heinrich Hiesinger said.

Restructuring in Europe allows the company to focus on opportunities in India, said TV Narendran, chief executive of Tata Steel, said in Brussels. “It will not be a company that will be sucking cash but will be generating cash,” PTI reported citing Koushik Chatterjee, executive director of Tata Steel.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition