With Tata Steel clinching joint venture (JV) with Thyssenkrupp to create new European steel giant, the combined strength would enhance sustainability of steel business, EY today said.
"In times of lingering surplus capacity in Europe and growing disruptions in global trade frameworks, the combined strength should enhance sustainability of the business, according to Anjani K Agrawal, Partner and Global Steel Leader, EY.
Thyssenkrupp-Tata Steel JV will be a formidable European steel major, combining the strengths of both partners in the areas of research and development, product and service innovation, market access, customer relationships and talent, Agrawal said.
"The JV is likely to derive cost synergies primarily from procurement, business enablement...while over a longer period, capex and working capital integration should help conserve cash significantly," he added.
Tata Steel had announced last week that 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.
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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.
In a presentation made to analysts/investors on the definitive agreement with Thyssenkrupp AG for a 50:50 JV, Tata Steel had said that capital structure is designed to ensure financial robustness and in order to achieve that, it will transfer external debt of 2.5 billion euros.
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