Tata Steel Limited and Thyssenkrupp AG have signed a Memorandum of Understanding to create a leading European steel enterprise by combining the flat steel businesses of the two companies in Europe and the steel mill services of the Thyssenkrupp group.

The proposed 50:50 joint venture - Thyssenkrupp Tata Steel - would be focused on quality and technology leadership, and the supply of premium and differentiated products to customers, with annual shipments of about 21 million tonnes of flat steel products.

The joint venture would have a pro forma turnover of about €15 billion per annum (Rs 115,000 crore) and currently employs about 48,000 people spread across various locations. It would be headquartered in the Amsterdam region of the Netherlands. The proposed combination of businesses would be formed through a non-cash transaction framework, based on fair valuation where both shareholders would contribute debt and liabilities to achieve an equal shareholding in the venture.

Thyssenkrupp Tata Steel would have a robust capital structure that is well matched by the underlying free cash flows of the company. It would benefit from the scale and distribution network capability of the combined assets to achieve quality, technology and cost leadership in the European steel industry. It is also the clear intent of both partners to remain as long term investors and continue the present network configuration of all the upstream hubs in the proposed joint venture company.

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