Swedish steelmaker SSAB has called off talks with Tata Steel Ltd for a possible acquisition of the Indian company’s IJmuiden steel mill in the Netherlands.
SSAB said in a public statement on Friday that the “synergies that we saw in the transaction would not fully justify the costs and investments”.
Mint reported on 25 January that discussions between Tata Steel’s management and the SSAB team had hit a roadblock with two large SSAB shareholders expressing reservations. A person Mint spoke to at the time said SSAB was concerned about the increased carbon footprint that would accompany the purchase of the Dutch plant.
“We have carefully evaluated Tata Steel IJmuiden and have concluded that an acquisition would be difficult for technical reasons. We cannot be sufficiently certain that we could implement our industrial plan with the preferred technical solutions as quickly as we would wish. We cannot align Tata Steel Ijmuiden with our sustainability strategy in the way desired,” said Martin Lindqvist, President and CEO at SSAB.
Tata Steel said in a separate statement that SSAB has withdrawn its initial interest in the IJmuiden steel plant. “However, Tata Steel wishes to confirm that it is committed to arriving at a strategic resolution for its European portfolio. Tata Steel’s IJmuiden plant is among the most environmentally efficient and cost-competitive steel producers in Europe,” the statement said.
While not directly attributing the failure of talks to any particular reason, SSAB said in its statement that it is “leading the transformation of the steel industry to fossil-free production. The group’s goal is to be the first in the world, in 2026, to supply fossil-free steel to market and to be a fossil-free company by 2045.
“The rationale behind the discussions concerning Tata Steel IJmuiden was based on our customers’ clear desire for a strong supplier of a broad range of fossil-free steel,” the statement said. “Through an expanded range of steel products, which in the long term can be converted to fossil-free products, SSAB can become a more comprehensive supplier of fossil-free steel to existing and new customers in key segments. This has also been about creating synergies between existing operations in the Nordics and in IJmuiden and getting closer to the European market.”
The turn of events is a negative for Tata Steel, said Amit Dixit, vice president Institutional Equities at Edelweiss Securities.
“We would have expected ₹35/share addition on the target price. However, the deal has not been concluded possibly due to ESG concerns of two shareholders. In terms of stock reaction, the stock performance has remained subdued ever since the deal hit roadblock. So, some of it is already built-in. However, re-rating potential of the stock takes a beating and so does its deleveraging plans.” Shares of Tata Steel closed 3.65% lower at ₹601.15 on the BSE, widely underperforming a 1.26% fall in the benchmark index.
