Tata Steel announced the start of the formal sale process of its U.K. steel assets, the outcome of Tata Steel Europe’s decision last month to divest its entire shareholding in Tata Steel U.K. As part of the group’s commitment to protect the interests of “all stakeholders” during the disinvestment process, Tata Steel on Monday said it had agreed to sell its Long Products Europe business to Greybull Capital, a family investment office. “The 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 steelmaker said in a statement. The agreement with Greybull, an investor in distressed companies, will save thousands of jobs. The Long Products Europe business employs 4,800 people, 4,400 in the U.K. and 400 in France.
The steel industry in the U.K. and Europe has been on a downturn owing to the global oversupply of steel, high production costs and cheap imports.
The sale includes the Scunthorpe works, two mills in Teesside, an engineering workshop in Workington, a design consultancy in York, a mill in Hayange, France, and sales and distribution facilities.
Greybull announced that it was arranging a £ 400 million investment and financing package for the Scunthorpe business. It will also see the business being given back its historic name – British Steel.
Although there will be no layoffs, workers will be asked to take wage cuts and reduced pension benefits.
Roy Rickhuss, General Secretary of the largest steelworkers’ union, Community, welcomed the deal. “So far, Tata Steel has honoured its commitment to be a responsible seller of the business by allowing time for the deal to be done.”
The focus is now on finding a buyer for the other major plant owned by the Indian steel major at Port Talbot in Wales, which employs 4,000 workers. This is a more complex proposition as the negotiations will cover pension fund liabilities, high business rates, green energy levies and tackling cheap imports.
While Greybull has not ruled out its interest in Talbot, the only firm expression of interest has come from the India-born entrepreneur Sanjeev Gupta, owner of the commodity company Liberty House.
Mr. Gupta, whose plan for Port Talbot envisages replacing blast furnaces with electric arc furnaces that will use steel scrap, is firm that he will not assume pension fund liabilities of almost £ 500 million.
He wants relief from high energy costs currently driven by green levies, and will not take on the estimated £ 1 billion site cleanup costs. In return he promises to retain the 4,000 strong workforce and generate profits in two years.
