Economy

Tata Steel agrees to sell speciality unit

Liberty House Group will buy the Yorkshire-based maker of speciality steel for £100 million

Tata Steel agreed to sell its U.K. speciality steel business, which employs about 1,700 people, to Sanjeev Gupta’s Liberty House Group for £100 million.

The two companies reached a definitive agreement on Thursday after having initially signed a letter of intent over the deal in November.

The speciality division covers assets in Yorkshire, and services centres in Britain and China, and focuses on steel for the aerospace, automotive and oil and gas industries.

The sale would leave Tata Steel with its strip products business, after selling its long products business to Greybull Capital last year, as it seeks to transform and restructure its European operations in the face of unrelentingly tough conditions for the industry.

“It’s good for Tata Steel, which has turned around in the December quarter,” said Paras Bothra, president equities at Aashika Stock Broking in Mumbai. “The sale of the U.K. speciality business will further add to its profitability. Now it is to be seen if the company is able to find a solution to the U.K. pension scheme,” Mr. Bothra said.

The deal is subject to regulatory clearances, Britain’s largest steelmaker said in a statement.

“We will be handing over a business which has been transformed following difficult decisions to restructure and refocus on higher-value markets,” Bimlendra Jha, CEO of Tata Steel UK, was quoted as saying in the statement.

Mr. Gupta, the executive chairman of Liberty House, said the asset was one of a handful of operations in this sector and would enable the company to “melt scrap steel to create high value added products.” The company, he said, was focusing on a strategy to recycle U.K. scrap using renewable energy, and that the acquisition represented a major step forward.

Liberty House has made a string of purchases in the U.K. steel sector over the past two years, acquiring Scottish assets of Tata Steel last year.

Unions welcomed the development. “Community has been campaigning for months for longer term certainty for these highly skilled jobs and we will now engage more directly with Liberty to understand their plan for the business,” said Roy Rickhuss, general secretary of the Community union.

Unions are currently balloting members on proposals to change the British Steel Pension Scheme, which Tata Steel says is essential to the sustainable future of its British business. The company said it was in discussions with the scheme’s trustee and the pension regulator to develop a structural solution to the scheme in the coming months.

Resolving the pension issue would help Tata Steel further the talks with Germany’s ThyssenKrupp over its strip products division, focused at its Port Talbot steelworks. The companies said last year that they were in merger talks, though the current structure of the pension scheme remains a major impediment to any deal.

Shares of Tata Steel slid 2.2% to ₹459.90 on the BSE on Thursday, valuing the company at almost ₹30,820 crore. The announcement of the agreement came after market hours in Mumbai.

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Printable version | Aug 4, 2020 2:45:09 PM | https://www.thehindu.com/business/Economy/Tata-Steel-agrees-to-sell-speciality-unit/article17278822.ece

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