India-based Tata Steel and German steelmaker Thyssenkrupp have announced that they expect the European Commission to reject the 50-50 merger between two companies, as the Commission expects substantial remedies in the form of sale of assets of the proposed venture.
The parties stated that further commitments or improvements would adversely affect the intended synergies of the merger to such an extent that the economic logic of the joint venture would no longer be valid. Consequently, the partners assume that the European Commission, that has until June 17 to make a decision, will not approve the joint venture.
Germany’s Thyssenkrupp received a boost in the stock market value of 27 percent as a result despite its announcement of likely no profitability in 2019 and increases in funding toward legal investigations against them. On the other hand, Tata Steel lost 6 percent stockholder value after the announcement.
Thyssenkrupp announced that it would instead spin off its profitable lifts division with a potential aim to merge it with a separate entity. Thyssenkrupp announced that it would need to reduce 6,000 positions including 4,000 in Germany. Analysts state that Tata Steel may also need to lower its employment numbers given the need to redesign their growth strategy. The UK unit is in the special spotlight as it was removed from sale status due to the potential merger with Thyssenkrupp.