Pensions, work keys for the striking points in Jindal's Thyssenkrupp -acquisition conversations

Copyright © HT Digital Streams Limit all rights reserved. The private held Jindal Steel International, part of the Naveen Jindal group, made a non-binding bid in September to obtain Thyssenkrupp’s European steel arm. Summary at the heart of the negotiations is how to manage Thyssenkrupp Steel Europe (TKSE) pension obligations, estimated at € 2-3 billion, and a possible restructuring plan for workforce that can involve significant dismissal. New -Delhi/Mumbai: Fiercely pension obligations and reorganization of the workforce emerged as important issues in Naveen Jindal’s bid to obtain Thyssenkrup Steel Europe (TCSE), as discussions continue on the potential role of the Indian billionaire in the German steelmaker’s turnaround, according to two people. The crux of the negotiations is how to manage TKSE’s pension obligations, estimated at € 2-3 billion, and a possible restructuring plan for workforce that may involve significant dismissals. Both issues have long deterred buyers and complicated ThyssenKrupp’s efforts to download the loss-making steel unit. The European steel division is around € 2.7 billion, or about half of Thyssenkrupp’s total € 5.4 billion pension obligations, while employing only 28% of the group’s workforce, the first of the two persons cited earlier said, both spoke on the condition of anonymity. This follows Jindal, who led a delegation to Germany last week for discussions with Thyssenkrupp management and other stakeholders, Mint reported earlier. “The company and its employees are seeking fixed assurance that these obligations will be fully complied with,” this person added. While the discussions continue, Jindal is also considered informally for a seat in the Supervisory Council of TKSE, where he can advise on employee negotiations and pension reforms, this person said. In particular, it is not necessary for a shareholder position to serve on the board under the German enterprise law. Mint could not independently verify whether or not this council’s bargain will be granted. The Naveen Jindal group has not yet responded to inquiries sent by Mint by email. The private held Jindal Steel International (JSI), part of the Naveen Jindal group, made a non-binding bid in September to obtain Thyssenkrupp’s European steel arm. The proposal includes a portion of the pension obligations and investment in green steel technologies to revive operations. The potential agreement of Jindal Steel International is estimated in the € 3-4 billion region, according to an ICICI direct report of September 17. The potential transaction can be one of the largest foreign bets by an Indian promoter in the industrial sector in Europe. Jindal has also promised more than € 2 billion fresh investment to complete ThyssenKrupp’s Direct Reduction Iron (DRI) project in Duisburg, adding electric arc oven capacity, which is essential to unleash steel production. Thyssenkrupp, in ‘Ne -mail -answer, said that the Executive Council will “review this offer carefully with particular attention to its economic viability, continuation of the green transformation and employment on our steel locations.” It refused to comment on commercial details or transaction structure. German legal framework under German legislation works businesses with a double plate structure and separate the executive and supervisory boards. The latter consists of an equal number of shareholders and employee representatives. Jindal’s appointment, if that happens, would only require approval from the shareholder side, one of the people quoted earlier said. The Stock Corporation Act (AKTG) and the Codetermination Act (Mitbestimmungsgesetz) allow supervisory management members to be appointed from outside the company, regardless of shareholding status. Pension obligations and negotiations Jindal, who wrote to union representatives before officially announcing his bid, believed he emphasized the continuity of employment and long -term sustainability in his proposal. By the way, for Indian steel makers who tried to gain a foothold in Europe through acquisitions, the negotiation of pension obligations was a major concern. For example, in the case of the 2007 acquisition of Corus by Tata Steel, the pension obligations were a major concern and were addressed by the establishment of a vehicle for the acquisition and creation of the British Steel Pension Scheme (BSPS). The BSPs were created in an attempt to separate the pension obligations from the main business. However, Tata Steel had to carry the pension obligations of a specific section between 2008 and 2016. In the case of Thyssenkrupp, the company also announced significant work cuts years before Jindal’s bid for the steel unit. These cuts in the work were part of a broader, prolonged attempt to address challenges such as cheaper Asian competition, high energy costs and a weakened global economy. In October, Thyssenkrupp called off his joint venture plan with Czech billionaire Daniel Kretinsky’s EP Group (EPG). Before Jindal’s bid, EPG acquired a 20% stake in TCSE in July with an agreement to discuss an additional 30% for a 50/50 joint venture. A Thyssenkruppe executive, who requests anonymity, then said that the mood within the company is “positive”. One of the two people quoted above said that the obligations for social security and work protection will be central to any agreement approved by the Supervisory Council. Analyst views According to Sumangal Nevatia, director of Kotak Securities, the bid represents the promoter group’s global expansion, rather than a move by the listed Indian entity. “With CBAM (carbon border adjustment mechanism) in the game and protectionist policies to improve the European steel economy, the promoter group is betting on a structural recovery,” Nevatia said. However, the success of the agreement depends on Jindal’s ability to provide credible obligations on pensions, jobs and green transformation. ” Analysts at ICICI Direct noted that if the agreement goes through, it could be one of the largest in the global steel industry, given TKSE’s scope-the largest steel manufacturer of Germany and the second largest flat-steel producer of Europe, with an annual capacity of 10.3 million tonnes. In a JP Morgan note from October 2, it was said that the steel division had a negative share value after its € 3 billion was pension obligations. “Our neutral recommendation reflects the high degree of uncertainty regarding key elements of Thyssenkrupp’s restructuring,” it says. Catch all the corporate news and updates on live currency. Download the Mint News app to get daily market updates and live business news. More topics #steel read next story