Thyssenkrupp-Tata deal talks continue

LONDON: Thyssenkrupp and Tata Steel’s attempts to combine their European steel operations are centred on how to value Tata’s troubled UK assets, according to people familiar with the matter.

While Thyssenkrupp is open to integrating Tata’s British unit in the joint venture, the Essen, Germany-based company wants Tata to find a way to fund its UK pension-scheme obligations as a precondition, the people said, asking not to be named because the negotiations are private. Tata wants to include the UK division in the Thyssenkrupp project, which would give it a bigger stake in the overall venture, one of the people said.

A representative for Tata declined to comment. A spokesman for Thyssenkrupp reiterated the company’s July statement that it wouldn’t comment on talks with Tata until there are material developments.

The British Steel Pension Scheme had a deficit of about 300 million pounds ($393 million) as of March 2016 on a “consistent basis,” the fund said in a statement to members this month.

That’s down from 485 million pounds a year earlier, according to its annual report.

Tata is looking for “more sustainable solutions” for its European business and it “would not be realistic to expect that a buyer of the UK business or a joint venture would take on responsibility for funding the current or future deficit,” the pension scheme said.

Market glut

European steelmakers are struggling with overcapacity, worsened by Chinese exports flooding the market. Combining forces would enable Tata, Europe’s second-biggest steelmaker, and third-ranked Thyssenkrupp to better use their facilities and cut costs.

Mumbai-based Tata said last month it’s in talks with companies, including Thyssenkrupp, about a joint venture.