Germany's Thyssenkrupp and India's Tata Steel signed a final agreement on Saturday to establish a long-expected steel joint venture, the European steel industry's biggest shake-up in more than a decade.
The final agreement comes after months of negotiations since an initial agreement was announced in September. Both companies hope it will help them respond to challenges in the volatile steel industry, including overcapacity.
The largest deal in Europe's steel industry since the takeover of Arcelor by Mittal in 2006, the 50-50 joint venture - to be named Thyssenkrupp Tata Steel - will have about 48,000 workers and about 17 billion euros ($19.9 billion) in sales.
Based in the Netherlands, it will be the continent's second-largest steelmaker after ArcelorMittal. It forms the core of Thyssenkrupp CEO Heinrich Hiesinger's plan to turn his steel-to-submarines conglomerate into a technology company.
"The joint venture not only addresses the challenges of the European steel industry," Hiesinger said. "It is the only solution to create significant additional value of around 5 billion euros for both Thyssenkrupp and Tata Steel due to joint synergies which cannot be realized in a stand-alone scenario."
Tata Steel Chairman Natarajan Chandrasekaran, in a separate statement, said the joint venture will create "a strong pan- European steel company that is structurally robust and competitive".
The deal comes as European steel makers face tariffs of 25 percent on their exports to the United States, their biggest market. That might force local market to absorb more volume as a result.
Since the tariffs were announced in late May, shares in European steelmakers ArcelorMittal, Thyssenkrupp, Salzgitter and Voestalpine have lost 8 to 17 percent.