By Marc Navarro Gonzalez 

Thyssenkrupp AG and Tata Steel Ltd. said Wednesday they have agreed to combine their European steel activities in a move that would create the region's second-largest steel producer.

The agreement brings to an end yearslong 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 inexpensive steel imports from countries such as China. European steelmakers have also shed thousands of jobs and closed unprofitable plants.

The 50-50 joint venture is expected to yield synergies of between EUR400 million and EUR600 million ($480 million and $719 million) a year but may result in the loss of up to 4,000 jobs, which would be shouldered by both companies.

"We are giving the European steel activities of Thyssenkrupp and Tata a lasting future," said Thyssenkrupp Chief Executive Heinrich Hiesinger. "We are tackling the structural challenges of the European steel industry and creating a strong No. 2."

The deal represents Thyssenkrupp's latest move to reduce exposure to steel and focus on its capital-goods operations such as elevators, sophisticated car components and submarines. It follows the sale of its Brazilian steel plant, the last of its steel assets in the Americas, earlier this year.

Shares in Thyssenkrupp rose almost 5% shortly after trading began Wednesday, while Tata Steel rose 0.9%.

The new company -- to be based in the Netherlands and named Thyssenkrupp Tata Steel -- will have pro-forma sales of about EUR15 billion, ship about 21 million tons of flat steel a year and have a workforce of about 48,000 employees at 34 sites. It will be Europe's second-largest steel producer after ArcelorMittal.

Under the agreement, both companies will have equal representation in the joint venture's management and supervisory boards.

The companies said they hoped to formally sign the deal in 2018 and complete and start the JV in late 2018, following regulatory approval, especially from the European Union.

 

(END) Dow Jones Newswires

September 20, 2017 05:23 ET (09:23 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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