Tata Steel and ThyssenKrupp plan to combine European steel activities

Tata Steel and ThyssenKrupp propose to merge their European steel businesses in a deal that would create a number two player in the market, combining the world’s fourth and tenth largest players.

The companies have stated that they have signed a memorandum of understanding and expect to conclude a joint venture agreement in early 2018.  The transaction would be subject to regulatory approvals.  As presently understood, ThyssenKrupp and Tata would hold equal shares in a joint venture consisting of ThyssenKrupp’s European business and Tata’s European flat steel business.

Tata paid £6.7bn to buy Corus in 2007, against competition from CSN of Brazil.  Ten years on from that, how different the world looks?  It may be that the merger represents a concrete step to build a sustainable future for Tata’s European steel activities.  The proposed transaction is expected to deliver annual cost savings of up to 600m euros (£533m; $720m).

The transaction will almost certainly be reviewed by the European Commission and comes against an industry backdrop where the sector faces increasing consolidation, excess supply from Chinese steel-makers and minimal new entry.  The market analysis is likely to be painstaking, examining different product and geographic markets, especially the UK as Tata’s core EU presence.