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Tata Steel stock rises on JV with Thyssenkrupp to create Europe's second-largest steel company

The JV, which has been under discussions since September last year, combines the European steel businesses of the Indian steel major with the German firm to create Thyssenkrupp Tata Steel BV.

twitter-logo BusinessToday.In        Last Updated: July 2, 2018  | 10:59 IST
Tata Steel stock rises on JV with Thyssenkrupp to create Europe's second-largest steel company

The Tata Steel stock rose in morning trade today after firm said last week it has agreed to the terms of a 50-50 joint venture with Germany's Thyssenkrupp to create Europe's second-largest steel company after Lakshmi Mittal's ArcelorMittal. The JV, which has been under discussions since September last year, combines the European steel businesses of the Indian steel major with the German firm to create Thyssenkrupp Tata Steel BV.

The new steel company will have a total workforce of 48,000 employees spread across 34 sites. Reacting to the development, the stock rose over 3% to 586.50 on the BSE.

At 10:40 am, the stock was trading 1.18% or 6.70 points higher at 574.55 level.

The stock opened at 575.20 level and hit a low of 572.20 level on BSE.

It has been gaining for the last three days and has risen 5.92% in the period.

The stock has risen 10.74% during the last one year and has fallen 17.70% since the beginning of this year.

23 of 27 brokerages rate the stock "buy" or higher, three "hold" and one "sell"; their median price target is Rs 794.50, according to Reuters.

In a presentation made to analysts/investors on the definitive agreement with Thyssenkrupp AG for a 50:50 JV, Tata Steel said capital structure is designed to ensure financial robustness and in order to achieve that, it will transfer external debt of 2.5 billion euros.

The joint venture will issue warrants equivalent to 10 per cent of equity capital to Thyssenkrupp - subject to certain dilution provisions, can be monetised through secondary sale in case of IPO.

The JV formation will also result in deconsolidation of Tata Steel Europe from Tata Steel Group balance sheet and facilitate deleveraging, the company said in the presentation.

The combine will be aimed at creating a sustainable European steel enterprise - a strong new number two in European steel market with sales of 17 billion euros and shipments of 21 million tonnes.

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

"This is a significant milestone for Tata Steel and we remain fully committed to the long-term interest of the joint venture company," he said.

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