Rival Steel Manufacturers Tata Steel (NSE:TATASTEEL) and Thyssenkrupp (ETR:TKA) have agreed to merge their European steel operations.
The deal between India’s Tata Steel and German rival Tyssenkrupp will see the creation of Europe’s second largest steel group.
However, the move will see the loss of jobs for both companies to accommodate the merger; it is estimated that around 4,000 jobs losses will be undertaken, in both the administration and production arms of the businesses.
“Under the terms of the planned joint venture, we are giving the European steel activities of Thyssenkrupp and Tata a lasting future,” Thyssenkrupp Chief Executive Heinrich Hiesinger 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,” he added.
Natarajan Chandrasekaran, chairman of Tata Steel, echoed the sentiment, stating:
“This partnership is a momentous occasion for both partners, who will focus on building a strong European steel enterprise,” he said.
“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.”
The 50-50 joint venture is expected to produce annual cost savings of up to 600 million euros (£533 million; $720 million) for the firms.
In addition, annual synergies of between €400 million and €600 million (£355 million and £533 million) across sales, administration, logistics and research and development are anticipated as a result of the merger.
The deal is subject to approval from Thyssenkrupp’s supervisory board and Tata Steel’s board of directors, and alongside that of the European Commission.
Currently, shares in Tata Steel are up 1.63 percent, whilst shares in Thyssenkrupp are up 3.62 percent as of 12.10PM (GMT).