Tata Steel’s proposed joint venture with German steel major Thyssenkrupp is likely to be hit by delays as workers and investors questioned the viability of the current business plan. Representatives from the Tata Steel Europe European Works Council (EWC), formed to address issues of transnational interest that significantly affect the Indian steel company’s employees in Europe, said in a statement this week that they remained “unconvinced” and also found Thyssenkrupp’s lack of engagement with them “deeply regrettable”.
“The EWC acknowledges there is an industrial rationale for pursuing this JV, but with the matters outstanding the EWC remains unconvinced that this partnership with Thyssenkrupp would be in the best interests of the TSE (Tata Steel Europe) operations and the employees we represent,” the statement notes. “At this stage there are still significant gaps in our knowledge which makes it difficult to reach definitive conclusions.
In particular, the financial structure of the deal remains a work in progress and there is very little available detail on the JV business plan,” it notes. The statement is expected to delay the JV process, coming on the back of doubts expressed by American asset management fund Elliott Management Corp. In a recent letter addressed to Thyssenkrupp, Elliott highlighted the divergence in performance in Tata and Thyssenkrupp’s steel businesses and stressed that the German firm must seek a better deal.
“This significant divergence in relative valuation should be adequately reflected in the final terms of the steel JV,” Elliott wrote in the letter reported by German newspaper ‘Frankfurter Allgemeine Zeitung’. Thyssenkrupp CEO Heinrich Hiesinger had hoped for the JV to make significant progress by the end of this month. However, he still needs to convince the company’s supervisory board to sign off on the deal and the latest developments seem to have thrown the timelines further off-track.
Tata Steel said it welcomed the European Works Council’s recognition of the industrial rationale for the proposed joint venture with Thyssenkrupp and the conclusion of this stage of their consultation process. A spokesperson said: “We believe in the business plan for the proposed joint venture and we are committed to delivering the joint venture without the need for compulsory redundancies.
“We will continue to engage in constructive dialogue with our employee representatives throughout the process of creating the proposed joint venture.” The proposed JV between two of the world’s major steel companies would combine Thyssenkrupp’s and Tata Steel’s European steel operations to create Europe’s second-largest steelmaker after steel tycoon Lakshmi N. Mittal’s ArcelorMittal.
Meanwhile, Tata Steel said it will continue to share information with the European Works Council about a recent announcement to sell its Cogent electrical steels business as part of a strategy to strengthen focus on strategic strip products and markets.