ThyssenKrupp and Tata Steel officially signed an agreement to create a European steel giant
Date:2018-07-04 View:869 Tag:ThyssenKrupp and Tata Steel officially signed an agreement to create a European steel giant
ThyssenKrupp and Tata Steel formally signed an agreement to merge the two steel companies in Europe to form a joint venture. The company will become the second largest steel company in Europe with an estimated annual turnover of 17 billion euros, an annual shipment of 21 million tons, and employs approximately 48,000 people.
Dr. Heilich Hüsingen, CEO of ThyssenKrupp Group, said: “Our joint venture is not only focused on the challenges facing the European steel industry. In fact, it has brought considerable value enhancements to both parties. Synergies can generate an added value of about 5 billion euros, which neither of us can achieve independently."
As early as September 2017, the two parties have signed a memorandum of understanding on the joint venture. Since the signing of the Memorandum of Understanding, the valuations of the two companies have changed. The change is also reflected in the final contract: Once an initial public offering (IPO) is initiated, ThyssenKrupp will hold a 55% stake and Tata will account for 45%. In addition, ThyssenKrupp will have the right to unilaterally decide when the IPO will be launched. The joint venture was named Thyssenkrupp Tata Steel B.V. The two parties will jointly build a high-quality steel company across Europe and make it a leader in the quality and technology of the global steel industry.
“With the smooth progress of the joint venture, we have jointly created a highly competitive steel company. This is based on the current situation of the European steel industry and the rational decision made by the two companies' development strategies. It contributes to the European industry in steel. The core areas guarantee employment and protect the sustainable development of the upstream and downstream of the industrial chain,” Heilich Hüsingen said.
The two parties will establish a holding company in Amsterdam, the Netherlands, to manage the joint venture business. The holding company will adopt a two-tier management structure consisting of the board of supervisors and the board of directors. The Board of Supervisors and the Board of Directors each have six seats, which will be equally distributed between ThyssenKrupp and Tata.
Due diligence and fairness statements financially calculate the synergy that will create between €400 million and €500 million per year. They are mainly derived from the integration of procurement and management expenses and the increase in asset utilization. It is predicted that the joint venture is expected to achieve additional positive effects through the optimization of capital expenditures and working capital. In addition, the joint venture company will focus on high value-added links in the steel industry through a number of measures including strengthening research and development to achieve high levels of growth.
In order to give full play to the cost synergy of the joint venture, the two sides are expected to cut about 4,000 jobs in the next few years. This layoff pressure will be roughly equal between the two companies. In addition, the joint venture plans to evaluate production sites from 2020 to integrate and optimize the entire production system.