German’s thyssenkrupp and India’s Tata Steel have signed a memorandum of understanding to combine their European steel activities in a 50/50 joint venture to be named ‘thyssenkrupp Tata Steel’. The companies announced this early on Wednesday morning.

The joint venture will be managed through a lean holding company based in the Netherlands. It is to have a two-tier management structure with equal representation from thyssenkrupp and Tata. The basic structures in Germany, the Netherlands and Great Britain will be retained. All employee participation rights will continue to be respected as before, thyssenkrupp said.

thyssenkrupp ceo Heinrich Hiesinger calls the alliance with Tata a “… very good fit. … Not only do we share a clear performance orientation, but also the same understanding of entrepreneurial responsibility toward workforce and society,” he says in a statement sent to Kallanish. Natarajan Chandrasekaran, chairman of Tata Steel, confirms that “The Tata Group and thyssenkrupp share similar culture and values,” in a similar statement sent by the Indian steelmaker.

The new entity is set to have pro-forma sales of about €15 billion ($18 billion) and a workforce of about 48,000, currently at 34 locations. Shipments are envisioned to be about 21 million tonnes a year. After the ramp-up phase, the joint venture partners expect annual synergies of €400-600 million.

The two joint venture partners expect that leveraging the cost synergies across the entire entity will require a reduction in workforce over the years ahead. This could be by up to 2,000 jobs in administration and potentially up to 2,000 jobs in production. This burden is expected to be shared roughly evenly between the two parties.

The process will now move to the next phase in the transaction with due diligence and negotiations on the definitive detailed agreements, Tata says in its statement.

thyssenkrupp says it will give further details at a press conference in the course of Wednesday morning.