Tata Steel starts UK biz sale; sells Long Products to Greybull for £1

The transaction likely to conclude by June this year.

The embattled steelmaker appointed KPMG LLC as process advisor for the "thorough, but expedited sale" of its entire shareholding in its subsidiary Tata Steel UK, which includes Britain's largest steel plant at Port Talbot.

 

Tata Steel UK today announced "signing of an agreement to sell its Long Products Europe business to family investment office, Greybull Capital.

"Sale for a nominal consideration, would be in exchange for Greybull Capital taking on the whole of the business, including assets and relevant liabilities, and securing an appropriate funding package."

The deal also includes clauses that workers accept a one year pay cut of 3 percent and changes in the pension scheme, which Britain's largest trade union, Unite, said is acceptable in order to save 4,400 jobs in, but "warned" UK government that it should initiate measures to protect the steel sector.

The Long Products Europe business employs 4,800 people - 4,400 in the UK and 400 in France.

 

Greybull is arranging an investment and financial package of 400 million GB pound (about USD 570 million), it said.

The financing, mainly through a combination of banks and shareholders, will be available to fund the working capital and future investments. Besides, an agreement to reset cost base of the business has been reached with key suppliers and trade unions, Greybull Capital added.

Greybull Capital will rename the Scunthorpe steelworks, part of Tata's Long Products Europe, as British Steel after the acquisition, which it says is expected in eight weeks.

According to the Telegraph, Greybull will pay a nominal amount of one GB pound or Rs 95 to acquire Tatas long products business in Europe.

Meanwhile welcoming the deal, Unite said that "Government ministers must now play their part too."

 

With the initiation of the sale process for UK business, Tatas plans to play a leading role in UK's once-storied sector that the Indian conglomerate had entered nearly a decade ago with a USD 14-billion takeover with much fanfare, is coming to an end.

Tatas entered UK's steel sector, that once dominated the British economy, in early 2007 with acquisition of Anglo-Dutch steelmaker Corus after a fiercely fought takeover battle with Brazil's CSN -- which till date remains the biggest ever overseas acquisition by an Indian group. 

On the UK business sale process, it said following the

advice from the Tata Steel Board to evaluate all options for the portfolio review of Tata Steel UK, the Board of Tata Steel Europe at a meeting held on March 31 reviewed several options.

 

Keeping in view the interest of all stakeholders, Board (Tata Steel Europe) has "decided to commence process of divestment of its entire shareholding in Tata Steel UK."

Tata Steel Europe said it will run "a thorough, but expedited sale process by reaching out to a wide universe of potential investors globally."

The formal process has commenced "today" with dispatch of the Summary Information Memorandum to potential investors.

Tata Steel and its advisers are committed to working together and conducting the process in a transparent and time bound manner, the firm said.

Last month, Tata Steel put its entire UK business on the block, a development that has put thousands of jobs at risk amid a deepening crisis in the steel sector, which saw the government holding crunch talks with Tata Group Chairman to help the conglomerate find a buyer in a bid to save jobs.

Meanwhile, UK's Business Minister Sajid Javid tweeted: "Today I will be updating Parliament on government action to help find a buyer for Tata Steel's UK operations and secure viable future for UK steel."

Tata Steel, in December last, signed a Letter of Intent with Greybull Capital to enter into exclusive negotiations for the potential sale of Long Products Europe.

 

Executive Chairman of the Long Products Europe business Bimlendra Jha said: "This sale is the best possible outcome for employees who have worked relentlessly to ensure the business's survival and helped to make it attractive to a potential buyer."

Tata Steel Europe CEO Hans Fischer said: "Under these current challenging market conditions in Europe with the soaring levels of imports from China, we are happy that Tata Steel UK and Greybull Capital have entered the final stage of completion of the sale of shareholding in Longs Steel UK."

The sale covers UK-based assets including the Scunthorpe steelworks, two mills in Teesside, an engineering workshop in Workington, a design consultancy in York and the associated distribution facilities, as well as a mill in northern France.

Welcoming the "imminent deal", UK's largest trade union Unite "warned" government that failure to allow steelworkers to compete on an even playing field would leave Scunthorpe steelworkers who were making huge sacrifices to secure the industry "high and dry".

As part of the deal to secure 4,400 jobs, workers are being asked to accept a one year pay cut of 3 percent and changes to their pension scheme, it said, adding that ministers "must now play their part too".

"This means supporting steelworkers by ensuring infrastructure such as HS2 and defence projects are built with British steel, as well as tackling dumping of cheap imports and high energy costs," Unite convenor for Tata Steel Scunthorpe, Martin Foster said.