Tata Steel, the world's sixth largest steel company is merging its European acquisition, Corus, with itself next September to save on operational costs amid the global decline in demand for steel.

Tata Steel acquired Corus in 2007 in a protracted bidding war with Brazil's CSN for around  $12 billion but coninued to operate the the Anglo-Dutch firm as an unlisted European subsidiary. (See: Tata Steel completes Corus acquisition) 

Quoting a Corus executive, the UK's Daily Mail, reported that the merger will take place in September and the headquarters of the merged company would be located at the Indian head office in Mumbai, India.

The report quoted Alan Todd, construction and development general manager at Corus, "Tata Steel's construction-related assets would benefit from Corus in the UK and the Continent and there would also be huge cost benefits from Tata's supply of raw materials."

The merger would enable Corus save around £350 million in costs and enable it to meet its raw material requirements from Tata Steel.

The report said some Corus executives of would be given seats on the board of Tata Steel and the French-born Corus Stel CEO Philippe Varin would take over as Chief Executive when B. Muthuraman, the long-standing head of Tata Steel steps down in September.

Corus has annual revenues of about £12 billion and was formed in 1999 by a merger of British Steel and Koninklijke Hoogovens. It has three divisions - strip products, long products and distribution and building systems.

Last month, Corus had announced a cut in production by 30 per cent over the next six months and cut 400 jobs and temporarily shut down two blast furnaces at its plants in Port Talbot and Scunthorpe in Britain and IJmuiden in the Netherlands, to align its production with a demand slowdown in Europe, caused by the global economic downturn.

The price of steel, along with the price of other raw materials such as oil and metals, has been falling in the past three months on fears of a prolonged recession. The prices for hot rolled coil, which was hovering at $1,200-$1,250 a tonne, is now around $600-700.

This month, Corus asked the Netherlands government for financial help from its €6-billion ($7.8 billion) economic bailout fund to help cut down on the work hours of nearly 4,600 employees, wherein employees of Corus in the Netherlands would be paid 70 per cent of their wage as unemployment benefits by the Dutch government and Corus would pay the remaining 30 per cent over a period of six weeks. (See: Corus to avail of government funds in Netherlands for 4,600 employees) 

Last week, Varin asked the British government to replicate the Dutch scheme in the UK to save jobs and the company is negotiating with the workers of Corus in the UK to take a 10 per cent pay cut in order avoid redundancies amid falling output as Corus pushes through a £350 million cost-saving plan, which it had announced earlier.

Varin, a graduate of the French finishing school, Ecole Polytechnique joined Corus in 2003 as chief executive and is credited with having turned the company around, which was floundering with losses of £458 million in 2002 and its share price slipping to 40 pence in 2003.