German industrial group Thyssenkrupp has approved plans to merge its steel-making business with Tata Steel.
The merger would create Europe’s second largest steel-maker, after Arcelor Mittal. The two companies had previously warned 4,000 jobs could go.
Between them, they employ about 48,000 workers. India’s Tata owns UK plants including Port Talbot in south Wales.
Unions have been asking for safeguards to protect the future of Port Talbot, which employs 4,000 people.
Thyssenkrupp’s supervisory board gave the go-ahead to the joint venture on Friday – the two companies have been in negotiations for more than a year.
The new firm will have annual sales of about £13bn. The merged group anticipates it will make costs savings of between £350m to £440m a year.
When details of an initial agreement emerged last September, both sides said they expected about 4,000 jobs would go as a result of the merger, half from administration and half from production.
The job losses will be shared evenly between the two companies.
In Wales, where almost 7,000 people are employed by Tata, unions hope the deal will bring an end to uncertainty for workers.
Roy Rickhuss, general secretary of Community – the steelworkers’ union – welcomed the announcement, saying it would have “the potential to safeguard jobs and steel-making for a generation”.
“However, this joint venture will only succeed if the necessary strategic investments are made to allow the business to thrive,” he added.
Tata announced in 2016 that it wanted to sell off its entire UK operations – before scrapping plans and optioning for a merger deal.
Thyssenkrupp chief executive Heinrich Hiesinger has previously said the two companies needed to consolidate and become more efficient because of increasing pressure from imports and an overcapacity within the industry.
More recently, European steel makers have faced 25% tariffs on exports to their biggest market, the US.
“The joint venture with Tata Steel is an important milestone for the transformation of Thyssenkrupp to an industrials and service group and will lead to a significant improvement of the financial figures of Thyssenkrupp,” the group said in a statement.
It added that the “signing of the definitive agreement is expected shortly” and that the deal would be subject to clearance in several jurisdictions, including the European Union.
The new company will be called Thyssenkrupp Tata Steel and be based in the Netherlands.