Tata Steel and thyssenkrupp AG has signed, a definitive agreement to create a new company by combining their European steel businesses in a 50/50 joint venture.
Variant performance development of thyssenkrupp Steel Europe and Tata Steel Europe has differential valuation gap between the two entities. The pivot agreement includes compensation for this valuation gap in such form that in case of an Initial Public Offering (IPO) of the joint venture thyssenkrupp happens to receive a higher share of the proceeds, reflecting an economic ratio of 55/45 in favour of thyssenkrupp. In addition, thyssenkrupp has the right to exclusively decide on the timing for a potential IPO.
The proposed new company, likely to be registered with ROC, thyssenkrupp Tata Steel B.V., best to be positioned as a leading pan-European high quality flat steel producer with a strong focus on performance and technology leadership. The transaction is subject to merger control clearance in several jurisdictions, including the European Union.
The joint venture not only addresses the challenges of the European steel industry. It is the only solution to create significant additional value of around 5 billion euros for both thyssenkrupp and Tata Steel due to joint synergies which cannot be realized in a stand-alone scenario. For both partners the stake in the joint venture means a significant lift up of value.