BERLIN—Germany’s Thyssenkrupp and Tata Steel of India signed a preliminary deal Sept. 20 to merge the two companies’ European steel operations, a combination that could lead to up to 4,000 job cuts.
The firms signed a memorandum of understanding to form a 50-50 joint venture. Negotiations about details are to be concluded in time for a formal signing of the transaction at the beginning of 2018, and the merger of the second- and third-biggest players in Europe will require approval from the companies’ boards and from antitrust authorities.
The steel industry has long struggled with excess capacity and competition from China in particular.
The proposed merger, the result of talks first disclosed more than a year ago, would produce a company with revenue of about 15 billion euros ($18 billion) per year and, at present, some 48,000 employees at 34 locations. The two companies say they expect to save between 400 million and 600 million euros in costs per year by integrating activities including research and development.
The new entity is to be called Thyssenkrupp Tata Steel and be managed by what Thyssenkrupp called a “lean holding company” based in the Netherlands. Up to 2,000 administrative jobs and up to 2,000 jobs in production will likely be cut, with the impact “jointly shared between both partners,” Thyssenkrupp said.
“We will not be putting any measures into effect in the joint venture that we would not have had to adopt on our own,” Thyssenkrupp CEO Heinrich Hiesinger said in a statement. “On the contrary: by combining our steel activities, the burdens for each partner are lower than they would have been on a stand-alone basis.”