Thyssenkrupp's (TKAG.DE) works council is prepared to consider a merger of the group's European steel operations with those of Tata Steel (TISC.NS), it said on Tuesday, softening its no-go rhetoric over the consolidation plan.
The proposed 50:50 joint venture - Thyssenkrupp Tata Steel - would see the company ship around 21 million tonnes of flat steel products each year and would employ 48,000 people across Europe, 8,000 of which are in the UK.
Both companies will have a 50 per cent share in the joint venture, which will be managed through a holding company based in the Netherlands.
The merger would be through a non-cash transaction framework based on fair valuation where both shareholders would contribute debt and liabilities to achieve an equal shareholder in the venture.
Earlier in the day, the domestic steelmaker announced signing of an agreement with Thyssenkrupp to merge their steel operations in Europe in a 50:50 joint venture company. Over the longer term they expect those annual synergies to amount to between €400m and €600m (£355m and £533m) across areas like sales, administration, logistics and research and development.
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The agreement brings to an end more than a year of talks between the companies amid a flurry of deal activity among European steelmakers to cope with a protracted steel-capacity glut and a wave of low-priced steel imports from countries such as China.
Currently, shares in Tata Steel are up 1.63 percent, whilst shares in Thyssenkrupp are up 3.62 percent as of 12.10PM (GMT). "We are tackling the structural challenges of the European steel industry and creating a strong No 2", said Heinrich Hiesinger, chief executive of ThyssenKrupp.
Long-awaited news of a deal between Tata Steel Limited and thyssenkrupp AG has finally surfaced after months of speculation.
The deal could have sweeping implications for the industry and for 8,000 workers employed in the United Kingdom in particular. Under the agreement, both the companies will have 50% stake in the newly formed entity.
They have been in negotiations since previous year when Tata withdrew from a sales process to sell its entire United Kingdom operations, including Port Talbot - the largest steel works in the UK.
The deal is subject to approval from Thyssenkrupp's supervisory board and Tata Steel's board of directors, and alongside that of the European Commission.