Indian-owned Tata's UK Steel plants have signed an agreement with German steel company Thyssenkrupp to merge into a pan-European venture called Thyssenkrupp Tata Steel B.V. This deal makes the joint entity Europe's second-biggest steelmaker after Arcelor Mittal.

German-owned Thyssenkrupp's supervisory board gave the go-ahead to the merger on Friday, June 29 - the two companies have been in negotiations for more than a year. Between them, they employ about 48,000 workers in Germany, Britain and the Netherlands.

Tata had announced in 2016 that it wanted to sell off its entire UK operations - before scrapping plans and optioning for a merger deal. The joint venture will create a pan-European steel company that is structurally robust and competitive, Tata Steel chairman N Chandrasekaran said. "This is a significant milestone for Tata Steel and we remain fully committed to the long-term interest of the joint venture company," he said.

The Guardian reported the joint venture forms the core of Thyssenkrupp CEO Heinrich Hiesinger’s plan to turn the steel-to-submarines conglomerate into a technology company.

"The joint venture not only addresses the challenges of the European steel industry. It is the only solution to create significant additional value of around euros 5 billion for both Thyssenkrupp and Tata Steel due to joint synergies which cannot be realised in a stand-alone scenario.

"...With the joint venture we create a highly competitive European steel player - based on a strong industrial logic and strategic rationale. This will help secure jobs and value chains in European core industries," Heinrich Hiesinger, CEO of Thyssenkrupp AG said. The move followed a memorandum of understanding signed by the two sides in September.

"The Board of Tata Steel has approved the terms to create a 50:50 joint venture which will combine the European steel businesses of Tata Steel and Thyssenkrupp AG and has adopted resolutions for the signing of the definitive agreement," Tata Steel said in a statement on Saturday in accordance with the Securities and Exchange Board of India (Sebi) regulations.

In a presentation made to analysts and investors on the agreement with Thyssenkrupp AG for a 50:50 JV, Tata Steel 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.

The JV will be managed as one integrated business through a holding company headquartered in the Amsterdam region of the Netherlands.

The deal comes as European steelmakers face stiff tariffs of 25% on their exports to the U.S., their biggest market, fuelling fears the local market might be forced to absorb more volume as a result.

Since tariffs were announced in late May by U.S. President Donald Trump on steel imports into his country, shares in European steelmakers ArcelorMittal, Thyssenkrupp, Salzgitter and Voestalpine have lost 8% to 17%.

(The above story first appeared on LatestLY on Jul 02, 2018 10:53 AM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).