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Tata Steel UK Pension Deal Approved, ThyssenKrupp Plans Europe Merger; Stock Up

Tata Steel Ltd.'s shares were gaining around 3 percent in the morning trading in India after reports that Thyssenkrupp AG may reach agreement this month to merge its European steel business with that of Tata Steel. The move comes after Tata Steel received regulatory clearance on its pension deal that would enable it to separate its UK pension scheme from the group.

The German company Monday said that talks were constructive and had entered the final stretch.

On Monday, Tata Steel said Britain's pensions regulator has approved a regulated apportionment arrangement or RAA in respect of the British Steel Pension Scheme or BSPS

The pension fund, estimated to be worth 15 billion pounds, was threatening to drag the company into insolvency.

As part of the RAA, a payment of 550 million pounds from Tata Steel UK has been made to the BSPS and shares in Tata Steel UK, equivalent to a 33% economic equity stake in the company, have been issued to the BSPS Trustee under the terms of a shareholders' agreement.

The company said in a statement, "Tata Steel UK has also agreed to sponsor a proposed new pension scheme, subject to certain qualifying conditions being met. Now the RAA has completed; all members of the BSPS will be invited to transfer to the new scheme."

"If the qualifying conditions are met, members who choose to will transfer to the new scheme. The new scheme would have lower future annual increases for pensioners and deferred members than the British Steel Pension Scheme, giving it an improved funding position which would pose significantly less risk for Tata Steel UK," the company added.

Tata Steel noted that the net financial impact of the RAA, including the payment of the agreed 550 million pounds settlement amount, will be reflected in the Q2 FY18 financials for the company.

Thyssenkrupp's shareholders last week reportedly put pressure on the company to clinch a deal after talks over a potential combination dragged on for a year-and-a-half. The delay was mainly due to talks over Tata Steel's British pension liabilities.

A Thyssenkrupp spokeswoman said both companies were now close to a memorandum of understanding that would lead to the creation of the second largest steelmaker in Europe.

by RTT Staff Writer

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