Saturday, 19 October 2019

Tata to sell Yorkshire steel plants in £100m deal safeguarding 1,700 jobs

YORKSHIRE: Tata has signed a letter of intent to start exclusive talks to sell its Yorkshire-based speciality steel business to Sanjeev Gupta’s Liberty group for £100m. The agreement will give certainty to workers at the plants in Rotherham, Stocksbridge and Brinsworth who produce steels used in the automotive, aerospace and oil and gas sectors. Almost twice that number of jobs in the supply chain depend on the business, and staff working in these businesses will gain clarity over their future with the deal. Tata put its entire UK steel business up for sale in the spring as a combination of high energy costs, global overcapacity and China dumping subsidised steel on the market brought the industry to its knees.

However, several months later Tata “paused” the sale, saying it was exploring a tie-up with European rival ThyssenKrupp and looking at selling off only selected assets. Bimlendra Jha, chief executive of Tata Steel UK, said: “The speciality steels business is independent of the pan-European strip products supply chain and this announcement is in line with the overall restructuring of the UK portfolio. “This is an important step forward in seeking a future for speciality steels. We now look forward to working with Liberty on due diligence and other work streams so that the sale can be successfully completed.” Describing the agreement as a “hugely important milestone”,  Mr Gupta said: “We recognise the world-class skills of the speciality steels workforce and are eager to join with them to develop the business and increase market share, both domestically and internationally”. A sale is subject to regulatory  approval and due diligence but the two companies say they expect the deal to complete in the first quarter of 2017.

Speciality steel is just the latest in a string of acquisitions by Liberty, which has a strategy of buying up distressed assets as it looks to expand its industrials portfolio. Last week it bought a Scottish aluminium smelting plant from Rio Tinto, and the group has previously purchased several businesses from Tata, including plants in Scotland. Community, the union that represents the steel industry, called the agreement a “positive step for the UK steel industry” but warned that there were still “major issues to address”. One of these is the fate of Tata’s sprawling Port Talbot site in south Wales. There are fears that a tie-up between Tata and ThyssenKrupp could result in the plant’s closure, with newer facilities in Europe winning out as a merged business seeks to eliminate overlaps. However, documents seen by the Telegraph indicate that despite Port Talbot’s age, it is managing to produce steel at a lower cost than plants across the Channel, giving hope to staff in Wales. A further hurdle to selling off the business has been the 130,000-member pension fund that comes attached. When Tata first announced it was considering a sale, the scheme had a near-£500m deficit that caused potential buyers to shy away, though moves in the market mean the size of this funding hole has been reduced considerably.

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