Buyout firm Excalibur enter bid for Tata Steel’s UK assets

06 May 2016


Excalibur Steel UK Limited, the management buyout (MBO) team backed by Welsh technology billionaire Sir Terry Matthews, has confirmed its intent to buy Tata Steel's UK assets.

Excalibur Steel has submitted a letter of intent to acquire Tata Steel's UK assets and will soon be meeting bankers to raise finances needed for the deal.

Tata has already received two formal bids, including one by Sanjeev Gupta's metals group Liberty House and another by a team of former Tata Steel staff who have the backing of the Welsh government, for acquiring the steel giant's loss-making UK plants.

The Welsh government will extend support to the MBO team of Excalibur and through them the Tata Steel staff, to gain control of the steel assets.

"I can confirm that the Welsh Labour government is giving financial support to the MBO team to help them put their bid together," Welsh first minister Carwyn Jones said.

Stuart Wilkie, a former Tata UK executive, who leads the buy-out group, said it is holding talks with one British and three international banks to present its buyout plan. ''Ideally, by the end of next week we will have secured necessary lines of finance,'' Reuters quoted Wilkie as saying on Thursday.

Wilkie said Tata Steel UK is more efficient now and has reduced losses from £1 million a day to a year before to a quarter of that level.

''That's significantly better than what was in the (turnaround) plan,'' he said.

While Excalibur looks better positioned than Sanjeev Gupta's metals group Liberty House, which also submitted letter of intent to buy Tata's UK operations this week, employee concerns about funding and pensions remain.

Liberty also bolstered its bid team with the appointment of Prof Julian Allwood, the Cambridge professor who has drawn up a plan that advocates making high-value products from recycled steel for the aerospace and car industries.

Liberty's executive chairman Gupta said, ''The conclusions of the Cambridge team match our own industry analysis and our green steel strategy very closely and we believe their work will be hugely valuable to us in developing and refining our business model for the sector.''

Liberty also argues that making liquid steel from scrap involved half the cost and a third of the carbon footprint of the blast furnace method, and could save many thousands of jobs in the UK.

However, Gupta added, ''While we firmly believe the future of UK steel is in recycling, we are very conscious that we need to protect the high-end customer base in automotive and other applications, so we will work with them to forge a transition plan that meets their expectations.''

The final report from Allwood's team, drawn from six years of government-funded research, concluded that the world has more blast furnaces than it will ever need.

High-cost European steel plants are unable to compete with China's modern factories, and the new blast furnaces that India plans to set up.

The option for the UK is to switch to making liquid steel from domestic scrap, most of which is currently exported for melting abroad, the report said.

Moreover, the supply of steel scrap in the UK is projected to double to 20 million tonnes a year over the next 10-15 years.   

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