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Tata steelworks Port Talbot, Wales, April 26, 2016.Reuters file

The European steel industry felt the biggest shake-up in more than a decade, as India's Tata Steel Ltd Germany's ThyssenKrupp signed a final agreement today to establish a long-expected steel joint venture. The deal will mean Indian-owned Tata Steel's UK plants are merged into a pan-European venture with annual sales of about £17bn. ThyssenKrupp's supervisory board on Friday gave the green light for a steel joint venture with Tata Steel, paving the way for the European steel sector's biggest merger.

Both the steel giant reached to an agreement after months of hectic negotiations since an initial agreement was announced in September last year. Both companies hope it will help them respond to challenges in the volatile steel industry, including overcapacity.

This is the largest deal in European steel industry since Laxmi Niwas Mittal took over Arcelor in 2006. The 50-50 joint venture will be named ThyssenKrupp Tata Steel which will have about 48,000 workers and about €17 billion ($19.9 billion) in sales. The Joint Venture will be based out of Netherlands and will be Europe's second-largest steelmaker after ArcelorMittal.

Heinrich Hiesinger, CEO of ThyssenKrupp said that "the joint venture not only addresses the challenges of the European steel industry. It is the only solution to create a significant additional value of around €5 billion for both ThyssenKrupp and Tata Steel due to joint synergies which cannot be realized in a stand-alone scenario."

The deal comes amid European steelmakers face tariffs of 25 percent on their exports to the US after the Trump administration decided to initiate a global trade war. The United States is the biggest market of the European manufactured steel. That might force the local market to absorb more volume as a result.

Shares of European steelmakers ArcelorMittal, ThyssenKrupp, Salzgitter and Voestalpine have sunk 8%-17% since the announcement of tariffs in May.

Notably, at the time of initiating the agreement in September 2017, both sides said they expected to lay off about 4,000 people as a result of the merger, half from the administration and half from production. Tata announced in 2016 had planned to sell off its entire UK operations before scrapping plans and opting for a merger deal.