Tata Steel deal likely in Sept: Thyssenkrupp

Thyssenkrupp could reach an in principle agreement this month to merge its European steel business with that of Tata Steel, the German group said on Monday, adding talks were constructive and had entered the final stretch.

Shareholders last week put pressure on Thyssenkrupp to clinch a deal after talks over a potential combination dragged on for a year-and-a-half, held up by negotiations over Tata Steel’s British pension liabilities.

That hurdle was removed after Tata Steel received regulatory clearance on a pension deal initially reached a month ago, enabling it to separate its UK pension scheme from the group.

Tata Steel on Monday said Britain’s pensions regulator has approved a regulated apportionment arrangement (RAA) in respect of the British Steel Pension Scheme (BSPS). Estimated to be worth £15 billion, the pension fund threatened to drag the company into insolvency, making it less attractive to a potential buyer of its assets.

As part of the RAA, a payment of £550 million from Tata Steel UK has been made to the BSPS and shares in Tata Steel UK, equivalent to a 33% economic equity stake in the company, have been issued to the BSPS Trustee under the terms of a shareholders’ agreement.

A spokeswoman for Thyssenkrupp said both groups were now close to a memorandum of understanding.