3rd October 2017
Olivier Aeschlimann, Senior Financial Analyst, Fund Manager
Thyssenkrupp AG and Tata Steel Ltd have announced the merger of their European steel mills in order to create a company owned 50/50 by the two companies. The aim is to create a group with worldwide scope, while reducing overcapacities, which penalise the sector. The new company, with a capacity of 21 million tons, will be number 2 on the European market, behind Arcelormittal (60 million tonnes). Important synergies are expected: the merger should generate EUR 600 million in economies per year, through the reduction of 4000 jobs, but mainly through realisation of economies of scale. From a strategic viewpoint, this operation will allow Thyssenkrupp to move away from the steel sector, which penalises the valorisation of the group. The new co-company will not be consolidated and can in future be listed on the stock exchange. So the know-how of Thyssenkrup in capital goods, like elevators, should finally be appreciated to its true value.