German industry giant ThyssenKrupp and Indian behemoth Tata have signed a memorandum of understanding on the merger of their European steel operations. The move is to address overcapacities in the market.
The agreement in principle reached Wednesday between Germany's ThyssenKrupp and India's Tata follows more than a year of tough negotiations on a tie-up that would combine the two companies' steel businesses.
ThyssenKrupp announced the final accord would be signed at the beginning of next year.
It indicated the merger would lead to annual synergies of 400 to 600 million euros ($480 to $720 million), adding that up to 4,000 jobs would have to be cut in the joint venture — that's about 8 percent of the joint workforce.
The new entity will be headquartered in the Netherlands, with ThyssenKrupp and Tata both expected to hold a 50-percent stake each. The merged businesses will initially employ some 48,000 people.
Dutch Prime Minister Mark Rutte said in a tweet he was glad the headquarters of the merged company would be in his country, praising Tata's pledge to keep operations going at the IJmuiden steel plant.
The tie-up is subject to approval by ThyssenKrupp's supervisory board, which has been in favor of combining operations to address the problem of overcapacities.
The German company's works council said earlier it was prepared to consider a merger with Tata, softening its no-go rhetoric over the consolidation plan.
Nevertheless, trade union and staff council activists are putting up a fight to prevent massive job cuts. They have called a protest rally in the western German town of Bochum for this Friday, with at least 5,000 steelworkers expected to attend.
hg/jd (dpa, Reuters)