Thyssenkrupp, Tata Steel reach compromise in steel JV talks: Sources

Options included cash payment to Thyssenkrupp, changing 50-50 ownership structure of the venture, lowering the debt to be transferred to it

 

TThyssenkrupp and Tata Steel are nearing a €15 billion ($17.4 billion) deal this week to combine their European assets into a global steel giant, people familiar with the development told Reuters.

Talks to hammer out the final details are progressing well and a compromise has been reached on closing a valuation gap between the businesses, three of the people said. The combination of ThyssenKrupp's and Tata Steel’s European steel assets, first announced in September, will create the continent’s second-largest steelmaker after ArcelorMittal with €15 billion in combined sales.

People with knowledge of the matter told Reuters this month that the compromise options includes a cash payment to ThyssenKrupp, changing the 50-50 ownership structure of the venture, lowering the debt to be transferred, or limiting dividend payments to Tata Steel for a number of years. “Talks are very constructive, they are on the final stretches”, said one of the people.

Negotiations are ongoing and could still be delayed or collapse at the last moment, the people said, adding that both companies had a great interest in getting a deal done.

ThyssenKrupp and Tata Steel both declined to comment on the matter. 

The joint venture was originally planned to be signed in early 2018 but was delayed after ThyssenKrupp's steel business performed much better than Tata Steel’s, requiring a reassessment of the deal. While giving ThyssenKrupp boss Heinrich Hiesinger more leverage in negotiations, the gap has also enabled activist fund Elliott, who disclosed a stake in the steel-to-submarines group last month, to put more pressure on the CEO to deliver.