Thyssenkrupp and Tata Steel will not go very far in concessions to gain approval for a planned steel venture, four people familiar with the matter said, adding their offer might not be enough to satisfy the European Commission.

The two companies last year struck a deal to combine their European steel units to create the continent's second-largest steelmaker after ArcelorMittal, a move that must be cleared by the European regulators.

Brussels last month sent a statement of objections in its antitrust review of the transaction, effectively asking for remedies in exchange for approval in three areas -- electrical steel, galvanised steel for car parts, and packaging steel.

While Thyssenkrupp and Tata Steel are working on a remedy package, they are unlikely to make far-reaching concessions, three people familiar with the matter said, increasing the risk of a lengthy tussle with the Commission.

Two of the people said the groups would argue that remedies in the areas of electrical and galvanised steel were not needed.

"The whole JV is half the size of ArcelorMittal, so Tata and Thyssenkrupp are trying to challenge the view of the EU on galva, they're not accepting it, they're going to try resist it as much as possible," one of the people said.

"Why would you leave ArcelorMittal being so big?"

Another person said an overly generous remedy offer would also eat into planned synergies of 400 million to 500 million euros ($452-$566 million), which has been one of the cornerstones of the transaction for shareholders on both sides.

A spokesman for Thyssenkrupp said the company was in constructive talks with the Commission and that it remained confident that the transaction could be completed in the spring. Tata Steel was not immediately available for comment.

FINE BALANCE
The situation highlights growing pressure on Thyssenkrupp boss Guido Kerkhoff, who must strike a fine balance between demands of powerful labour leaders, who have warned not to give up too much, and investors that have been waiting for a deal for about three years.

It is widely expected that the companies need to offer up remedies in the area of packaging steel, where the combined entity would have a large share of the European market. Thyssenkrupp, however, will try to keep its Rasselstein packaging unit, the people said.

Ultimately, it will come down to who needs the joint venture more. Thyssenkrupp, whose steel unit has been seen as the stronger part of the planned entity, could live with a collapse, Kerkhoff said last week.

If the deal fails, the German conglomerate may lose a right to get a bigger share of proceeds from a potential public listing and, more importantly, an opportunity to offload about 4 billion euros in liabilities.

But at the same time it would leave more meat on Thyssenkrupp Materials AG, the entity that will be left after a planned spin-off of Thyssenkrupp's capital goods business: elevators, car parts and plant engineering.

Tata Steel, on the other hand, is considered to be keener on the joint venture, partially because it improves future prospects for its ailing Port Talbot plant, the people said.

The two groups must send their remedy proposal to Brussels by March 20, two of the people said, adding this would delay an April 29 deadline the Commission has set to rule on the matter by 15 working days.