Thyssenkrupp scraps plans to merge with India's Tata Steel

Andrew Cummings
May 13, 2019

The biggest stumbling block in talks to the merger was largely resolved last May, when Tata said it had agreed the main terms of a deal with the British regulator to cut benefits for its 15 billion pound (USD 19.40 billion) British pension scheme.

"Thyssenkrupp and Tata Steel expect that the planned joint venture of their European steel activities will not go ahead due to the Commission's continuing concerns", the Essen-based company said in a statement.

Tata's said in a separate statement that both "partners assume with deep disappointment that the European Commission will not approve the joint venture". A plan to split the company in to two entities has now been put on ice.

The two industrial giants signed a deal last June to combine their European steel branches.

Germany's Thyssenkrupp will embark on a fresh restructuring and list elevators, its most successful business, after regulatory opposition sunk plans to hive off its steel division, unravelling its previous break-up proposal.

Thyssenkrupp is instead considering a new approach, involving a holding structure and a carve-out or partial listing of its elevators division, they added.

Thyssenkrupp faces "a situation where we had to make this major change, because it is the right decision for the company now in the changed frame conditions", he added.

Following the merger collapse meanwhile, Thyssenkrupp said it would slash 6,000 jobs worldwide in a structural shakeup.

Mustafa Okur, an industrial analyst for Bloomberg Intelligence, predicts the IPO could be worth "about 15 billion euros, based on our scenario, and comes as elevator-market sales accelerate".

The announcement saw Thyssenkrupp's stock soar, up 13.48% to 12.75 euros ($14.31), by around 1000 GMT on Frankfurt's stock exchange.

"From the point of the view of ThyssenKrupp and Tata Steel, further commitments or improvements would adversely affect the intended synergies of the merger to such an extent that the economic logic of the joint venture would no longer be valid". Addressing the media over a concall, Tata Steel managing director TV Narendran said, "while we are disappointed that the JV has not happened, things have also improved in the last three-four years, and we will continue to pursue other options".

At the same time, Thyssenkrupp said it will be open to new ownership structures for its auto parts, plant engineering and marine systems units, adding this could result in it owning a minority stake in them.

Thyssenkrupp unveiled plans last September to create two divisions: Thyssenkrupp Industrials, spanning its elevators, vehicle parts and plant engineering businesses, and Thyssenkrupp Materials, which included materials trading and shipbuilding.

Criticism from German shareholders quickly followed.

"It is clear that Thyssenkrupp's strategy of the past has failed", Cevian founding partner Lars Foerberg said.

"There must be no more historical or political taboos if Thyssenkrupp is to seriously tackle its long-standing underperformance and bring its businesses back on track".

The planned steel merger with Tata is off the table, said several familiar with the plans of Reuters news agency on Friday.

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