Swedish steel maker SSAB has called off the potential acquisition of Tata Steel’s Dutch unit, citing technical and commercial reasons, dealing a fresh blow to the Indian company’s plans to restructure the European business and deleverage its balance sheet.

The Swedish company said that it found that the proposed transaction, whereby Tata Steel was to sell the Ijmuiden plant in the Netherlands, would not be financially viable.

Tata Steel had entered into a discussion for the sale of the the 7-million-tonne Dutch unit with SSAB in the middle of November 2020, which analysts had guided could fetch as much as $3 billion to the Indian company.

Announcing the fourth quarter results on Friday, Martin Lindqvist, president and CEO of SSAB, said: “After deeper analysis and discussions, it became clear that there were limited possibilities to integrate IJmuiden into the framework of SSAB’s strategies.”

He said the acquisition would be difficult for technical reasons as it ‘cannot be sufficiently certain’ that SSAB could implement its industrial plan with the preferred technical solutions as quickly as it would like to, given that Ijmuiden could not be aligned to SSAB’s ‘sustainability strategy’.

Tata Steel, however, said the IJmuiden plant is among the most environmentally efficient and cost competitive steel producers in Europe.

It said the company would stay on course to find a strategic solution to the European business.

“Around two thirds of the business of Tata Steel is based in India with the best in class, highly cost competitive assets and strong cash flows and Tata Steel remains committed to undertake significant de-leveraging in FY21 and beyond,” the company said.

The Tata Steel stock took a hit after it confirmed SSAB’s withdrawal from the talks. It came off by 3.26 per cent to close at Rs 601.15 while the benchmark BSE Sensex lost 1.26 per cent.

In 2018, the company had to abort a potential merger of the entire European business, which also includes a 3 million tonne plant in the UK, with Germany’s Thyssenkrupp after failing to get a nod from European competition commission.

SSAB suggested that the synergy benefit would outweigh the cost of transforming Ijmuiden into the company’s sustainable strategy.

“Furthermore, the synergies that we saw in the transaction would not fully justify the costs required for transformation. This means that overall, the transaction would not meet our financial expectations,” the CEO said.

The end of the talk would mean that Tata Steel would have to look for a new partner for the European business which has been a drag on the company’s balance sheet for the most part since 2007 when it acquired the business for 6.2 billion GBP.