The German steel company Thyssenkrupp has agreed a merger of its European operations with Indian-owned Tata Steel.

The deal signed on Friday will mean the European steel sector’s biggest shake-up since the takeover of Arcelor by Mittal in 2006.

The new 50-50 joint venture – to be named Thyssenkrupp Tata Steel – will have about 48,000 workers and about €15bn (£13bn) in sales.

Based in the Netherlands, it will be the continent’s second biggest steelmaker after ArcelorMittal and forms the core of Thyssenkrupp CEO Heinrich Hiesinger’s plan to turn the steel-to-submarines conglomerate into a technology company.

“The joint venture with Tata Steel is an important milestone for the transformation of Thyssenkrupp to an industrials and service group and will lead to a significant improvement of the financial figures of Thyssenkrupp, effective with closing,” the group said in a statement. The definite agreement would be signed shortly, it added.

The move followed a memorandum of understanding signed by the two sides in September.

The Tata Steel chairman, Natarajan Chandrasekaran, said: “The joint venture will create a strong pan-European steel company that is structurally robust and competitive.

“This is a significant milestone for Tata Steel and we remain fully committed to the long-term interest of the joint venture company. We are confident that this company will create value for all stakeholders.”

Roy Rickhuss, the general secretary of the Community union, said steelworkers had fought hard to secure the future of British steel-making.

“As part of this joint venture, we have secured significant investment across Tata Steel’s UK business, including a repair of Port Talbot’s blast furnace number five, which could see it produce steel until at least 2026,” he said.

“With a commitment to avoid compulsory redundancies until October 2026, and the first £200m of any operating profit being invested back in the business, this joint venture has the potential to safeguards jobs and steel-making for a generation.”

The Unite union’s national officer, Tony Brady, said: “Tata Steel’s UK workforce is world-class and has worked tirelessly under a cloud of uncertainty to keep steel-making alive in the UK.

“Those steelworkers have made great sacrifices in working to secure a future for Tata Steel. We will be seeking guarantees over jobs and investment for the UK operations of the joint venture to secure the future of UK steel.”

Dr Heinrich Hiesinger, the chief executive of Thyssenkrupp, said : “We will create a highly competitive European steel player based on a strong industrial logic and strategic rationale.



“We will secure jobs and contribute to maintaining value chains in European core industries.”



The deal comes as European steelmakers face stiff tariffs of 25% on their exports to the US, their biggest market, fuelling fears the local market might be forced to absorb more volume as a result.

Since tariffs were announced in late May, shares in European steelmakers ArcelorMittal, Thyssenkrupp, Salzgitter and Voestalpine have lost 8% to 17%.



Hiesinger had faced pressure from activist shareholders Cevian Capital and Elliott Advisors to extract more commitments from Tata Steel, whose European business performed worse than Thyssen’s since the deal was first announced in September, thus creating a valuation gap.

Thyssenkrupp said that in case of an initial public offering of the joint venture, which is widely expected by investors and has been flagged by both companies, it would get a bigger share of the proceeds “reflecting an economic ratio of 55-45”.

The German group also said it expected annual synergies of €400m-500m from the transaction, having previously communicated a maximum of €600m.

Markus Grolms, the vice-chair of Thyssenkrupp’s supervisory board, said Tata Steel would continue to remain liable for environmental risks in Britain, where its Port Talbot factory, the least profitable of the joint venture, is based.

He said Tata’s Dutch unit would be part of the joint venture’s cash-pooling mechanism, which had been a key demand for German workers concerned that Tata would give its own workers better conditions in the new company.

“Yes, we do want to protect people. But we also want a company with better chances and less risks,” Grolms said.