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Thyssen, Tata on collision course over JV

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LONDON/FRANKFURT/DUESSELDORF: Thyssenkrupp and Tata Steel will not go very far in concessions to gain approval for a planned steel venture, four people familiar with the matter said, adding their offer might not be enough to satisfy the European Commission.


The two companies last year struck a deal to combine their European steel units to create the continent’s second-largest steelmaker after ArcelorMittal, a move that must be cleared by the European regulators.


Brussels last month sent a statement of objections in its antitrust review of the transaction, effectively asking for remedies in exchange for approval in three areas — electrical steel, galvanised steel for car parts, and packaging steel.


While Thyssenkrupp and Tata Steel are working on a remedy package, they are unlikely to make far-reaching concessions, three people familiar with the matter said, increasing the risk of a lengthy tussle with the Commission.


Two of the people said the groups would argue that remedies in the areas of electrical and galvanised steel were not needed.


“The whole JV is half the size of ArcelorMittal, so Tata and Thyssen are trying to challenge the view of the EU on galva, they’re not accepting it, they’re going to try resist it as much as possible,” one of the people said.


“Why would you leave ArcelorMittal being so big?”


Another person said an overly generous remedy offer would also eat into planned synergies of 400 million to 500 million euros ($452-$566 million), which has been one of the cornerstones of the transaction for shareholders on both sides.


A spokesman for Thyssenkrupp said the company was in constructive talks with the Commission and that it remained confident that the transaction could be completed in the spring.


A Tata Steel spokesman said the two companies remained committed to working with all relevant regulators to ensure the success of the joint venture deal.


The situation highlights growing pressure on Thyssenkrupp boss Guido Kerkhoff, who must strike a fine balance between demands of powerful labour leaders, who have warned not to give up too much, and investors that have been waiting for a deal for about three years.


It is widely expected that the companies need to offer up remedies in the area of packaging steel, where the combined entity would have a large share of the European market. Thyssenkrupp, however, will try to keep its Rasselstein packaging unit, the people said. — Reuters


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