End of Tata Steel-ThyssenKrupp merger: Chandra’s first step to undo what Mistry did
After N Chandrasekaran took over as the chairman of salt-to-software-maker Tata Group, Tata Steel’s breaking of from the planned merger with German conglomerate ThyssenKrupp might be his first big move.
A UK media report said that discussions on calling off the merger are on.
The talks of merger between Tata Steel and ThyssenKrupp had surfaced when Cyrus Mistry, who was ousted in October 2016, was still the chairman of the group. The deal could have made the merged entity the largest steel company in Europe, with blast furnaces in Wales, Netherlands and Germany.
The Sunday Times reported that the deal, which has seen little progress, may be under threat due to German pension liabilities.
Tata Steel is trying to solve its own 15 billion pound British steel pensions scheme. In January, nearly 10,000 workers voted in voted in favour of a new pension deal to save their jobs -- moving from a final salary pension to a less generous scheme in return for job safety. The Tata Group has meanwhile promised nearly one billion pound worth of investment over the next 10 years.
Tata Steel has been a bone of contention in the high profile boardroom battle after the ouster of Mistry, who also wanted to sell off the UK assets of Tata Steel, calling it a financial burden on the Group. The idea didn’t go well with Ratan Tata, who had spearheaded the ambitious acquisition of Corus as the then chairman before he was succeeded by Mistry.
Tata Steel has been trying to restructure its European steel business for a long while, after it acquisition of Corus didn’t turn out to be what the company wanted.
Global steel demand tanked, and expensive steel manufactured by European steel makers were replaced by cheap Chinese steel.
So, is Chandrasekaran, fondly called Chandra, undoing everything that Mistry had done, under performance pressure?
Tata Consultancy Services, the IT company where Chandra spend all his life, brings in 60% of Tata Group’s revenue and makes for 70% of its market capitalisation.
Chandra will have to get back some of Tata Group’s other core business to prominence. For example, Tata Motors. The company has been surviving on the growth of Jaguar Land Rover, the British auto major that Ratan Tata had bought and turned around. Tata Motors’ profits were down by 96% in the October to December quarter.
Another group company Indian Hotels Company that owns luxury hotel chain Taj Hotels Resorts and Palaces, is also facing its own problems.
Moving away from the ThyssenKrupp deal might be Chandra’s first mark of success as the chairman, but he has a long way ahead to restructure the Group, and undo the changes that Mistry made.
(With inputs from PTI)