German steel giant ThyssenKrupp said Friday that it expects the European Commission to block its proposed joint venture with Indian steel conglomerate Tata Steel due to "continuing concerns".

The Commission opened an "in-depth" investigation into the proposed merger in October last year amid concerns that the proposed deal between the two steel majors may reduce competition in the supply of various high-end steels.

Following an agreed extension last month for further negotiations, ThyssenKrupp confirmed that it had submitted a "substantial" offer to the European Commission the executive arm of the 28-member economic bloc.

However, the German major said that after a latest conversation it now seemed like the planned joint venture of their European steel activities will not go ahead.

Tata Steel, in a statement in Mumbai, also said that based on the feedback received from the Commission, "it is increasingly clear that the Commission is not intending to clear the proposed joint venture as it expects substantial remedies in the form of sale of assets of the proposed venture".

The proposed JV firm called ThyssenKrupp Tata Steel, which had been under discussions since September 2017, was to have a total workforce of 48,000 employees spread across 34 sites, producing about 21 million tons of steel a year with revenues of around 15 billion euros.

The German steel giant said that the EU took the improvements of the submitted covenants proposed by ThyssenKrupp and Tata Steel as an opportunity to conduct another market test.

"The new market survey did not resolve the Commission's concerns, although the partners had offered significant further concessions. From the point of the view of ThyssenKrupp and Tata Steel, further commitments or improvements would adversely affect the intended synergies of the merger to such an extent that the economic logic of the joint venture would no longer be valid. Consequently, the partners assume that the European Commission will not approve the joint venture," ThyssenKrupp said in a statement.

With the expected unsuccessful outcome of the steel joint venture, the Executive Board of ThyssenKrupp AG has reassessed the strategic options for the company and will propose to the Supervisory Board to not go ahead with the planned separation into two independent companies, it said.

"The economic downturn and its effects on business development and the current capital market environment have led to the separation not being able to be realised as planned," the company said.

Instead, Thyssenkrupp said it would fundamentally realign itself to significantly improve its operating performance. This will include a value based more flexible portfolio approach with greater freedom for the development of all businesses, a leaner holding structure and a stronger performance orientation.

"At the same time, the company will sustainably strengthen its capital base in order to gain the necessary financial leeway for necessary restructuring and business development," ThyssenKrupp said.

As part of this new strategy, the Executive Board of ThyssenKrupp AG will also propose an IPO of Elevator Technology to the Supervisory Board.

The Tata-ThyssenKrupp transaction was notified to the European Commission in September 2018 and had 90 working days to take a decision, a period which ended last month before a formal extension was agreed.

Under EU rules, the Commission has a duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

Tata Steel said both parties have been in intense engagement with all regulatory authorities and in particular the Commission to seek clearance.

"Based on the Statement of Objections published by the Commission, a comprehensive package of remedies was offered covering all the areas of concern highlighted by the Commission.

The remedies offered were developed considering the overall industrial strategy for the proposed joint venture, the integrated and complex nature of the supply chain to service customers and the need to build a sustainable business which would be able to endure the structural challenges faced by the European steel industry.

However, the feedback from the Commission based on the market test it has undertaken suggests that it is unlikely to clear the proposal in spite of the significant remedies offered.

While the proposed joint venture was an important strategic initiative for Tata Steel to create a sustainable portfolio in Europe that would have also helped to

de-consolidate the European Business and de-leverage its Balance Sheet, Tata Steel remains committed to the above strategy and would explore all options to achieve similar outcomes in the future.

Soon after the announcement of its failed merger with Tata Steel, Thyssenkrupp chief executive Guido Kerkhoff said the company will cut 6,000 jobs worldwide, including 4,000 in Germany.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)