Mumbai: Domestic steel giant Tata Steel and German Thyss-enkrupp AG have signed a memorandum of understanding (MoU) to create the second largest steel enterprise in Europe after ArcelorMittal by combining the flat steel businesses of the two companies in Europe and the steel mill services of the Thyssenkrupp group.

The proposed 50:50 joint venture — Thyssenkrupp Tata Steel — would be focused on quality and technology leadership, and the supply of premium and differentiated products to customers, with annual shipments of about 21 million tonnes of flat steel products, the companies said in a statement released on Wednesday.     

“This business combination creates a strong number 2 and is thus much better positioned to cope with the structural challenges in the Euro-pean steel industry,” said Dr Heinrich Hiesinger, chairman, executive board, Thyssenkrupp.

The joint venture would have a pro-forma turn-over of about 15 billion euros per annum (Rs 1,15,000 crore) and currently employs about 48,000 people spread across various locations.

It would be headquartered in the Amsterdam region of the Nether-lands. However, the companies informed that the proposed combination of businesses would be formed through a non-cash transaction framework, based on fair valuation where both shareholders would contribute debt and liabilities to achieve an equal shareholding in the venture.

The shares of Tata Steel rose 1.64 per cent to end the trading session at Rs 687.65 on the Bombay Stock Exchange.