The new joint venture, Thyssenkrupp Tata Steel, will be based in Amsterdam, with core profits estimated at 1.5 billion euros in the first year.
"Tata Steel India is in a strong position to grow faster and set to double its capacity through organic or inorganic route, post deal with Thyssenkrupp", Tata Group Chairman N. Chandrasekaran said on September 20.
Tata Steel Europe has been a strain on the parent company Tata Steel for the past 10 years, causing it to burn cash at a rate of about US$1bn a year.
The proposed transaction in Europe also paves the way for significant de-leveraging of the Tata Steel group's consolidated balance sheet and provides a platform for it to pursue future growth, he added. "Beyond a clear performance orientation, we also share the same philosophy of corporate responsibility towards employees and society", said Dr Heinrich Hiesinger, chairman, executive board, Thyssenkrupp.
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The two foresee annual synergies of 400 million ($480 million) to 600 million, helped by savings on areas including capacity utilisation, sales and administration and research and development.
Shares in Tata Steel rose 2% on news of the deal in Mumbai, while those in ThyssenKrupp opened 5% higher in Frankfurt. The companies flagged the possible loss of as many as 4,000 jobs, from a newly combined workforce of about 48,000.
But he said "question marks" remained over Tata Steel's British plants, which the company has wanted to exit.
"As always, the devil will be in the detail and we are seeking further assurances on jobs, investment and future production across the United Kingdom operations", Roy Rickhuss, chair of the committee, told the BBC.
"As a priority, we will be pressing Tata to demonstrate their long term commitment to steel making in the United Kingdom by confirming they will invest in the reline of Port Talbot's Blast Furnace No.5".
The deal will require approval of Thyssenkrupp's supervisory board, Tata Steel's board of directors and European regulators.
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