Indian steel major Tata Steel said on Wednesday that it would work towards creating a sustainable portfolio in Europe, hours after the EU's powerful anti-trust authority red flagged its proposed European steel joint venture with Germany’s ThyssenKrupp AG.
“Tata Steel noted with deep disappointment the conclusions of the EU. The company remains committed to its long-term strategy of focusing on growth in India, continue deleveraging its balance sheet and working towards creating a sustainable portfolio in Europe,” Tata Steel said in a statement.
The commission, the EU's executive arm, which held discussions with top brass of Tata Steel and ThyssenKrupp in the second week of last month, announced on Tuesday its decision to prohibit the proposed European JV of the two steel majors.
Tata Steel and ThyssenKrupp had signed definitive agreements on June 30, 2018 combining the steel businesses in Europe to create a 50-50 pan European joint venture company, focusing on customer centricity, technology and sustainability.
Industry analysts said the EU’s decision has brought the India-based steel major’s efforts to deconsolidate its European business back to square one, and that Tata Steel will now have to re-work its strategy for a viable option for its operations there.
“Almost one-and-half to two years of efforts by Tata Steel has come to a naught with the EU rejecting clearance to its plans to form a JV for the company’s European operations. The current global economic outlook will make it more challenging for the Tatas to strike a viable deal to deconsolidate its European business in the near future,” a steel industry analyst with a Mumbai-based rating agency, who did not wish to be identified, said.
Subsequent to its parleys with the representatives of the European Commission last month, Tata Steel had indicated that the European monopoly watchdog was ‘not intending’ to clear the proposal “as it (EU) expects substantial remedies in the form of sale of assets of the proposed venture”.
The company had said while the proposed joint venture was an important strategic initiative for it to create a sustainable portfolio in Europe, it would have also helped to de-consolidate the European Business and de-leverage its Balance Sheet.
“Tata Steel remains committed to the above strategy and would explore all options to achieve similar outcomes in the future.” the company said in a media statement last month.
Currently, around two third of the business of Tata Steel is India based.
The EU rejection of the Tata Steel-ThyssenKrupp JV proposal came, despite both the companies offered a comprehensive package of remedies, covering all the areas of concern highlighted by the Commission.
The EU, however, wanted further commitments or improvements to the remedy package offered by the two steel majors.
Any further commitments “would adversely affect the basic foundation of the proposed joint venture and the intended synergies arising from the merger to such an extent that the economic logic of the joint venture would no longer be valid”, Tata Steel had said.For all the latest industry news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.