The Tata Steel-Thyssenkrupp joint venture, which had sought to blend the steel assets of the two European giants in the game, teetered on the brink of collapse after the European Commission refused to clear the merger until the two partners improved upon their original offer to divest assets.

Both sides baulked at the proposition, arguing that the sale of more assets would wreck the rationale for the creation of the joint venture and make it unviable.

“The JV is over as the Commission did not approve it. Thyssen is not progressing with it. We will look at all strategic options,” Koushik Chatterjee, executive director and CFO of Tata Steel, said during a conference call.

When asked if an IPO was one of those options, Chatterjee said: “We can’t talk specifics. Every option will be pursued. The end outcome is what we are focused on.” He added that Tata Steel planned to reduce its debt by $1 billion irrespective of the joint venture.

The companies informed their respective shareholders that the 50:50 merger would not be approved by the European Commission as the European regulator wanted the duo to divest more assets than they had bargained for. Tata Steel and Thyssenkrupp had signed a definitive agreement on June 30, 2018. Since then, the partners have been in talks with the EC for its approval.

“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,” Tata Steel said.

“…further commitments or improvements to the remedy package would adversely affect the basic foundation of the proposed JV and the intended synergies arising from the merger to such an extent that the economic logic of the JV would no longer be valid and its fundamental sustainability would be severely impacted,” the company added.

The Tata Steel management said it would continue with the de-consolidation of balance sheet and deleverage of debt, despite the setback.

“Our business is far more sustainable than when Corus was acquired. At that time, it used to be four times that of Tata Steel. Today, 60-65 per cent of the business comes from India which is much more profitable,” said T.V. Narendran, MD & CEO of Tata Steel.

“Moreover, over the years, the EU business has also become more sustainable. So, we are in a better place than ever before,” Narendran said.

The merger had proposed to transfer Rs 20,000-crore of Tata Steel group debt to the joint venture. Asked whether the Tatas would continue to operate the Port Talbot plant in Wales that suffered a fire episode recently, the management said it expected the operations to become cash positive in order to remain sustainable.

The Tata Steel stock fell over 6 per cent on Friday to close at Rs 487.30 on the BSE.