Tata Steel, Thyssenkrupp Forge Ahead With JV as EU Starts Probe -- 2nd Update

(Adds Thyssenkrupp's response to the probe.)

 
   By Nathan Allen

Tata Steel Ltd. (500470.BY) and Thyssenkrupp AG (TKA.XE) will continue to pursue a merger of their respective European steel businesses, even after the European Commission opened an in-depth investigation into the deal due to competition concerns.

The Indian group said Wednesday that it has noted the commission's concerns and will continue holding discussions with the regulator, pledging to provide information and analysis of the merger as needed.

Tata continues to believe in the "strong industrial logic and rationale for the proposed joint venture," which would create Europe's second-largest steelmaker by revenue.

Germany's Thyssenkrupp said it isn't surprised that the commission will subject the deal to further scrutiny, saying that "for a transaction of this size, this is a normal practice," and that it will continue to cooperate.

The commission on Tuesday said the merger could reduce competition for some automotive-grade steels, certain coated steels and electrical steel used in engineering products.

Analysts and shareholders have had mixed reactions to the deal, which was a central part of former Thyssenkrupp chief executive Heinrich Hiesinger's plan to shift the conglomerate away from steelmaking and toward more profitable capital-goods manufacturing.

Activist investors Cevian Capital, which has a stake of around 18% in Thyssenkrupp, and Elliott Management Corp., which holds a stake of less than 3%, were reportedly unhappy with the terms of the deal.

Analysts at Jefferies doubt that the merger will meet value-creation expectations.

Mr. Hiesinger's replacement, CEO Guido Kerkhoff, has embarked on a more expansive restructuring since taking the reins of the German group, and plans to split Thyssenkrupp into two separate companies.

Write to Nathan Allen at nathan.allen@dowjones.com

(END) Dow Jones Newswires

October 31, 2018 06:32 ET (10:32 GMT)

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