DUESSELDORF, Germany (Reuters) - Thyssenkrupp’s (TKAG.DE) powerful labor representatives on Thursday signaled their support for a planned joint venture with Tata Steel (TISC.NS), effectively guaranteeing that the landmark deal will be approved by the group’s supervisory board.
Workers’ support for the deal is a major victory for Chief Executive Heinrich Hiesinger, whose vision to transform Thyssenkrupp into a technology company depends a great deal on reducing its exposure to the volatile steel industry.
Hiesinger, in the job since 2011, has faced growing criticism from key shareholders Cevian and Elliott in recent months, which have both argued that there is significant room for improvement at the steel-to-submarines conglomerate.
This also includes the planned combination of Thyssenkrupp’s and Tata Steel’s European steel assets to forge the continent’s No.2 player after ArcelorMittal (MT.AS) with 15 billion euros ($17.4 billion) in total sales.
“The joint venture that has now been agreed is better than any joint venture that would have been created without the participation of the labor side,” Thyssenkrupp works council head Wilhelm Segerath said on Thursday.
Speaking after a supervisory board meeting of Thyssenkrupp Steel Europe, Segerath, who is also a member on Thyssenkrupp AG’s supervisory board, said such a joint venture had never been the goal of employees but it was still the better alternative.
Half of the 20 seats on Thyssenkrupp’s board are held by labor representatives. Whether they would back the planned European steel venture has been the single biggest source of uncertainty for Hiesinger.
“It has always been our goal to secure jobs and sites, to safeguard the interests of our colleagues and to include all IG Metall members,” said Tekin Nasikkol, chairman of Thyssenkrupp Steel Europe’s works council and a member of Thyssenkrupp’s supervisory board.
“That has been largely achieved, I think.”
Thyssenkrupp’s supervisory board will meet on Friday to discuss and vote on the planned transaction.
Sources told Reuters on Wednesday that Thyssenkrupp and Tata Steel had reached a compromise on how to close a valuation gap between the businesses that had emerged since the transaction was first announced in September.
Writing by Christoph Steitz; Editing by Maria Sheahan and Edmund Blair