EU starts in-depth probe into Tata Steel-ThyssenKrupp merger
05 February 2019
Thyssenkrupp on Friday said it is holding constructive talks with the European Commission, which has launched an in-depth probe into the planned European joint venture with India's Tata Steel.
"We explicitly share the opinion of competition Commissioner (Margrethe) Vestager: Steel is of enormous importance to the European economy. That's why we need a strong European steel industry," Thyssenkrupp chief executive Guido Kerkhoff told shareholders at the group's annual general meeting on Friday.
The commission has set a 29 April deadline to rule on the transaction, which would create Europe's second-largest steelmaker after ArcelorMittal, but could demand painful remedies as well.
Tata Steel and ThyssenKrupp are major integrated producers of flat carbon steel and electrical steel, with significant production facilities in the European Economic Area (EEA), in particular in Germany, the Netherlands and the UK.
“The European Commission has opened an in-depth investigation to assess the proposed creation of a joint venture by Tata Steel and ThyssenKrupp,” the European Commission, the executive arm of the 28-member economic bloc, said in a statement.
Tata Steel had, in June, confirmed it agreed the terms of a 50-50 JV with ThyssenKrupp to create Europe’s second-largest steel company after Lakshmi Mittal’s ArcelorMittal. But the two may need to sell substantial assets to get EU nod as the proposed joint venture would breach the bloc’s merger regulations and reduce competition.
The Commission said it is concerned that the merger between the two may reduce competition in the supply of various high-end steels. “Steel is a crucial input for many of the goods we use in our everyday life, and competitive steel prices are vital for the European economy,” said Vestager. “Industries dependent on steel employ over 30 million people in Europe and we must be able to compete in global markets. This is why we will carefully investigate the impact of the planned combination of steel businesses on effective competition in the steel markets.”
The European Commission said its initial market investigation raised several issues, relating in particular to combining both companies' offer of certain specialty flat carbon steel and electrical steel products.
It specifically highlighted steel for automotive applications, predominantly galvanised, that are used to produce cars and car parts; metallic coated steel for packaging, which is used to produce various packaging solutions, such as food and aerosol cans; and grain oriented electrical steel, which is used to produce a variety of engineering products such as transformers, as areas of concern.
The Commission said it is concerned that, following the transaction, customers would face a reduced choice in suppliers, as well as higher prices. “These customers include various European companies, ranging from major corporations to numerous small and medium-size enterprises (SMEs). Many compete with imported products in the EEA, or export their products outside Europe and compete globally,” the Commission said in a statement.
The Tata-ThyssenKrupp transaction was notified to the European Commission on 25 September, but both companies chose not to make commitments during the initial investigation to address the Commission's preliminary concerns.
The Commission now has 90 working days, until 19 March 2020, to take a decision.