Mumbai: Tata Steel Ltd said on Monday that it remains in “constructive discussions” with Germany’s Thyssenkrupp AG for a potential merger of the two companies’ steel businesses in Europe.
There can, however, be no assurance that the discussions will result in a transaction, Tata Steel said in a BSE filing on Monday. The statement comes a day after The Sunday Times of the UK reported that Tata Steel could break off the merger talks.
The paper reported that the deal, which has been slow to progress, could be called off due to German pension liabilities.
Thyssenkrupp did not respond to an email query sent on Monday morning.
Tata Steel had, a year ago, decided to put its entire UK business on sale in the face of a slump in steel demand and prices, but the plan hit a roadblock due to uncertainty stemming from Britain’s decision to exit the European Union (EU).
The group eventually halted the sale process in July in favour of discussions for a joint venture with “strategic players in the steel industry, including Thyssenkrupp AG”.
The talks, however, have not yet led to a transaction.
Both companies have maintained that the discussions would not necessarily lead to a transaction.
For Tata Steel, the deal with Thyssenkrupp has been hanging fire for over a year as there were complications in negotiations over its huge pension deficit in the UK. The situation improved in December, when Tata Steel UK made some progress with its trade unions to replace its defined benefit pension scheme, British Steel Pension Scheme (BSPS), with a defined contribution plan.
Tata Steel’s European operations have been consistently losing money, prompting the firm to shutter some plants in Europe over the past two years.
Tata Sons Ltd’s ousted chairman Cyrus Mistry had warned that Tata Steel’s European steel business faced potential writedowns of more than $10 billion, only some of which have been booked, according to a 25 October email he sent to the board of the holding company. Tata Steel has denied this.
Last month, Tata Steel agreed to sell its UK specialty steels business to Liberty House Group for £100 million (Rs838 crore). The company also said that thousands of workers at Tata Steel’s sites in the UK had accepted its offer to move from a “final salary pension” to a less generous scheme, potentially saving their jobs and assuring the future of its plants.