Tata Steel: Delayed deal

 

The stock of Tata Steel rose to about a four-month high of ₹553 on the back of higher production and sales volumes for FY19, but soon fell by about 4 per cent from these levels with concerns cropping up over the merger of Tata Steel Europe with thyssenkrupp AG.

To restructure the European business, which has been bleeding the consolidated financials, Tata Steel had signed an agreement with thyssenkrupp to form a 50:50 joint venture (JV). The deal was initially expected to be closed by the end of FY19 and bring down the consolidated debt of Tata Steel by about €2.5 billion. Synergy benefits of about €400-600 million per annum, too, were anticipated.

 

 

But the deal has been facing several road blocks. Also, Tata Steel’s labour union has expressed concerns regarding the JV, stating that it may not be in the interest of the company. The delay has created a negative sentiment around the stock.

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