Shares of Tata Steel surged to a 6-1/2 year high on prospects of a deal with Germany’s Thyssenkrupp AG. Thyssenkrupp said on Monday it may reach an agreement in principle in September to merge its European steel business with that of Tata Steel. Tata Steel stock rose as much as 4.64% to the 6-1/2 year high of Rs 692 on BSE and was the biggest gainer on the benchmark Sensex today. The companies were close to a memorandum of understanding (MoU), paving the way for a detailed look at one another’s books and detailed negotiations before creating the second-largest steelmaker in Europe, Reuters reported citing a spokeswoman for Thyssenkrupp.
Thyssenkrupp CEO Heinrich Hiesinger is under pressure to deliver the planned combination, particularly following Tata Steel’s deal to cut its pension liabilities, after talks have dragged on for a year and a half. Hiesinger favours a steel joint venture, saying this is the best option to eliminate over capacities in the volatile steel sector but drawing opposition from labour representatives, who fear thousands of job cuts. “The management board is currently in talks over strategic options,” the spokeswoman said, adding a meeting of the supervisory board initially scheduled for 12 September had been moved back to ensure it was adequately informed.
Shares in Thyssenkrupp ended the day up 1.4% on Monday and have gained about 17% this year, partly in anticipation of a deal. Trade unions remain opposed to Hiesinger’s plan, preferring a carve-out that would see Thyssenkrupp list its healthy assets including its elevator unit on the stock market instead, in a fashion similar to utility RWE.
Earlier yesterday, Tata Steel announced that it has concluded a new agreement under which its UK business stands separated from the 15-billion pound British Steel Pension Scheme (BSPS). “Tata Steel UK has received confirmation from the pensions regulator that it has approved a regulated apportionment arrangement (RAA) in respect of BSPS,” Tata Steel said in an exchange filing. As part of the arrangement, a payment of 550 million pound has been made to BSPS by Tata Steel UK and shares in Tata Steel UK, equivalent to 33 per cent stake, have been issued to the BSPS trustee, the steel giant said.
The BSPS has now been separated from Tata Steel UK and a number of affiliated companies, it added. Last month, Tata Steel had announced clinching of the deal facilitating detachment of the BSPS from its UK business. The pact, signed by Tata Steel with the trustee of the BSPS, will pave the way for the Indian steel major’s potential merger with German giant ThyssenKrupp.