In a development that is good news for some and bad for others, Tata Steel and ThyssenKrupp have decided to join hands to create a new entity that will be the second largest steel manufacturer in Europe. The good news is apparently for both the companies and the bad news is for people who may end up losing their jobs due to the merger. However, it is not yet sure whether workers may lose their jobs. The new company will be named ThyssenKrupp Tata Steel and both companies will hold equal stake in the merged entity. A tentative deal has already been initiated and it is expected to be finalized in early 2018. The deal will need to be approved by the European Union.
Consolidation has been the key to the survival of steel companies in recent times. There’s an urgent need to cut costs, since there is overcapacity globally and cheap Chinese steel is flooding the markets. The merged entity will target annual revenue of 15 billion euros and will ship around 21 million metric tons of flat steel products. The merger is a no-cash deal. The deal will allow ThyssenKrupp to focus on high-end products whereas Tata Steel will gain by introducing a diversified product range for the Indian market. As per the deal, the new entity will combine Tata’s plants in the Netherlands and U.K. with ThyssenKrupp’s German assets. It would be the second biggest steel producer in Europe, next only to ArcelorMittal.