thyssenkrupp and Tata Steel has signed an MoU to combine their European steel activities in a 50/50 joint venture, positioning the merged entity to grab the number two slot in the European steel market just after ArcelorMittal.
Both companies released statements to this effect. thyssenkrupp stated: "The two joint venture partners expect that leveraging the cost synergies across the entire entity will require a reduction in workforce over the years ahead by up to 2,000 jobs in administration and potentially up to 2,000 jobs in production."
The job cuts are expected to be shared "roughly evenly" between the two parties.
The parties peg the annual synergies in the range of €400 million to €600 million, and the signing of the agreement is targeted for early 2018 and closing by 2018 year-end. The new entity is set to have a workforce of about 48,000, currently at 34 locations.
Dr. Heinrich Hiesinger, CEO of thyssenkrupp AG, said: "In Tata, we have found a partner with a very good strategic and cultural fit. Not only do we share a clear performance orientation, but also the same understanding of entrepreneurial responsibility toward workforce and society."
To be named thyssenkrupp Tata Steel, the planned joint venture will be managed through a lean holding company based in the Netherlands. It is to have a two-tier management structure comprising a management board and a supervisory board. Both boards are to have equal representation from thyssenkrupp and Tata.
Natarajan Chandrasekaran, chairman of Tata Steel, commented: “The Tata Group and thyssenkrupp have a strong heritage in the global steel industry and share similar culture and values." He added: "The strategic logic of the proposed joint venture in Europe is based on very strong fundamentals and I am confident that thyssenkrupp Tata Steel will have a great future."
In the months ahead, due diligence will be conducted. In the process, the negotiating parties will give each other access to confidential business documents to the extent permissible between competitors.
Among one of the five reasons listed for partnering was "culture and capabilities". The statement by thyssenkrupp read: "The two partners each have a highly capable and dedicated workforce who strongly identify with their company.
"thyssenkrupp and Tata have a cultural DNA equally characterised by the will to embrace change in order to secure their future. And both companies have the backing of strong shareholders through a trust structure that perpetuate the ideas and values of the original owners."