Tata Steel, Thyssenkrupp eye Europe JV

MUMBAI: In a shift from its earlier strategy of an outright sale of the UK business, Tata Steel on Friday said it’s in talks for a JV with German engineering giant Thyssenkrupp in Europe, which includes Port Talbot in Wales and the Netherlands operations. However, there is no clarity on shareholding structure of the proposed JV.

Tata Steel’s decision, which was announced after a marathon board meeting in Mumbai, was met with some early skepticism from unions which fear job cuts to drive synergies. They also fear the Tatas’ UK business losing out to the Netherlands unit because of Brexit uncertainty.
Earlier in the day, British business minister Sajid Javid met Tata Steel chairman Cyrus Mistry and its top management.

The JV proposal may provide a temporary relief to the beleaguered UK government, which had offered to buy up to 25% stake in the British operations, besides reducing a huge deficit in pension liabilities.

Tata Steel has kept the speciality steels and tube pipes business in the UK out of the proposed JV. The company plans to sell it separately and has also received interest from potential buyers.
The Port Talbot unit is the UK’s biggest steel plant with a capacity of 5.5 million tonnes, while the Netherlands unit has a capacity of 7 million tonnes. Tata Steel employs more than 11,000 people across locations.

In a statement, Tata Steel said that “discussions with Thyssenkrupp have been initiated to explore the feasibility of a strategic collaboration through a potential joint venture”. However, it added that the talks are at a preliminary stage and there can be no certainty of a transaction as the outcome depends on negotiations with various stakeholders.

Kaushik Chatterjee, Tata Steel’s finance director, said the success of its talks, especially the inclusion of the UK business in the potential joint venture, would depend on several issues, including finding a suitable outcome for the British steel pension scheme, successful discussions with the British trade unions as well as financial support from the UK government.
The latest move highlights that Tata Steel is keen to have a play in the UK steel sector. The Tatas have prospected several options after announcing a decision to divest the UK steel unit.
Several investors, including Indian-origin businessman Sanjeev Gupta-owned Liberty Group, Wilbur Ross and India’s JSW Steel, had expressed interest. But the unexpected Brexit vote pushed some bidders to have a rethink while the Tatas were also not fully convinced about the firepower of some of the suitors like Liberty House.

For the Yorkshire speciality steels business and the Hartlepool pipe mills in the UK, Liberty House has shown interest.

n the recent past, the German media had reported that Thyssenkrupp would combine its continental European steel business with that of Tata Steel’s Netherlands unit.
In March, Tata Steel had announced its intention to sell the UK assets.


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