Tuesday, June 21, 2016

News: The muddy waters of Tata Steel sale

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Tata Steel is considering selling off some of its UK assets separately according to reports in a national newspaper.

The Indian-owned steelmaker concluded that it is exploring all options for portfolio restructuring including the potential sale of Tata Steel UK, in whole or in parts. The formal process began on April 11 with contact made with 190 potential financial and industrial investors worldwide.

Seven suitors made it through to the next stage but some believe that Tata may even stay in the UK and keep some of its assets, especially as the Government examines pension liabilities and offers financial support. Port Talbot has been turned around since the much publicised £1m a day losses.

Now the Financial Times reports that despite having rejected bids from investors seeking to cherry-pick parts of the operation, Tata now seems open to selling off individual units of the UK business.

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Not a great prospect for the blast furnace at Port Talbot, it would make sense for the standalone Speciality Steels business in South Yorkshire. Tata Steel Europe's only Electric Arc Furnace based business produces around 225,000 tonnes of steel with a £275m turnover. Until recently it employed over 2,000 people at sites like Aldwarke and Stocksbridge. It is not considered a downstream business linked to Port Talbot and Tata Steel's strip products.

When asked about the Port Talbot works and selling off separate parts of the UK business by the BIS Committee in April, Bimlendra Jha, CEO of Tata Steel UK, said: "We have to find a solution to the whole. In finding that solution for the whole, if there are some very small parts, and independent parts, we can deal with it. But we would not deal with it that somebody says: "Leave alone Port Talbot and give us the rest," that's not a solution that is acceptable."

The FT states that: "The Government and Tata privately agree that the strongest candidates are JSW Steel of India and a joint bid between Endless, a UK private equity fund, and Wilbur Ross, a veteran US turnround investor, because of their financial positions."

It adds that Albion Steel, a new vehicle led by former Corus CEO, Tony Pedder, is lining up behind JSW with a view to acquiring Tata's specialist steels division in South Yorkshire.

As bidding opened, a spokesperson for Albion Steel said: "This opportunity is a complex one which has best prospect of successful execution if Tata is prepared to approach its disposal plans in a different way and to engage strategically with Albion and other interested parties to seek a negotiated structure."

The sale of Tata Steel's Long Products division to Greybull took two years and, whilst timescales for the sale of the remaining assets have not been given, the company has stressed the sense of urgency in order to remove uncertainty for employees, suppliers, customers and shareholders.

Tata Steel website

Images: Tata Steel

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