Tata Steel's Solution for Europe Assets Could Lie Outside Region

(Bloomberg) -- Tata Steel Ltd., which has lost more than $700 million in market value after shelving merger plans with Thyssenkrupp AG, expects a tie-up with a non-European partner to clear the region’s regulatory hurdles more easily.

“It is obvious that in Europe we will have limited options because Thyssenkrupp was the best option in many ways,” Chief Executive Officer T.V. Narendran said in an interview. “So when you look at the possibilities, obviously somebody from outside Europe who is interested in Europe will make it easier for us from the competition commission point of view.”

A company from outside Europe would reduce some of the concerns the European Commission had about the Thyssenkrupp merger relating to the two mills’ market share in the automotive and packaging segment, Narendran said, adding it was too early to comment on potential partners and the options being explored.

The collapse of Tata Steel’s planned joint venture with Thyssenkrupp has brought the Indian group’s more than $13 billion of debt in focus. The deal would have transferred some of the debt to the joint venture, allowing the Mumbai-based company to sharpen its focus on ramping up its profitable Indian business. As part of its pivot toward the domestic market, Tata has shed many of its global units, with the Southeast Asia operations set to be the latest to leave its fold pending a sale to China’s HBIS Group Co.

Global Assets Sale

Tata, which operates the iconic blast furnace at Port Talbot in the U.K. and another big plant in the Netherlands, has been closing and selling plants in the U.K. since the 2008 financial crisis to make the business more profitable.

“The first objective is to make sure the European business is cash positive so that it is not a drain on the cash flows in India,” Narendran said Tuesday at the company’s headquarters in Mumbai. Tata, which has about 21,000 employees in Europe with a capacity of 10 million tons of steel annually, will continue to operate its facilities as normal despite the idling of some capacities by major players in the region due to a weak market, he said.

Shares of the company fell 9.6% in the past three trading sessions since the breakdown of the Thyssenkrupp deal was announced. They pared some losses to trade 1.7% higher at 477.50 rupees at 9:41a.m. in Mumbai on Wednesday.

“This year we want to run a stable operation” in Europe after a challenging time last year, Narendran said. As for jobs, for now “any reduction will be if we sell any of our businesses,” he said.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net

To contact the editors responsible for this story: Phoebe Sedgman at psedgman2@bloomberg.net, Alpana Sarma, Keith Gosman

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