Tata Steel resumes talks with Germany's Thyssenkrupp for possible merger

Baosteel, SSAB also in race for German steel firm

Tata Steel Europe has restarted negotiations with Germany’s Thyssenkrupp for a possible merger almost a year after the two companies called off a joint venture proposal, citing the European Commission’s objections. According to investment bankers, both Tata Steel and Thyssenkrupp are facing a tough financial situation and will take steps to sell some assets so that they can meet Europe’s anti-competition norms.
 

“Since June last year, steel prices have crashed and the financial metrics of both companies have deteriorated. Tata Steel Europe is downsizing and seeking a bailout of 500 million pounds from the British government to run operations in the UK. So they have reasons to restructure their businesses,” said an investment banking source.

Global steel prices have fallen 11 per cent in the past one year, triggering a financial crisis in the sector. International media reported that ailing Thyssenkrupp had decided to exit its 200-year-old steel business and was negotiating with Tata Steel Europe, Baosteel of China, and Sweden’s SSAB to merge or sell its operations.
 

Baosteel declined to comment, as did SSAB. Tata Steel Europe had no immediate comment, according to Reuters.

When contacted, a Tata Steel India spokesperson said, “This article is speculative and Tata Steel as a policy does not comment on speculations." Bankers said Thyssenkrupp and Tata Steel were a perfect fit for each other and both had not abandoned talks that started three years ago. 

“It was nothing sort of a miracle for Tata Steel to land the Thyssenkrupp deal. So it should not let it go,” said a former director of Tata Steel. While Thyssenkrupp is the second-largest producer of flat carbon steel in Europe, Tata Steel is the third largest. Both companies are significant producers of metallic-coated and laminated steel for packaging applications and of galvanised flat carbon steel for the automotive industry.