Tata Steel in talks to sell European Long Products division
15 October 2014
Tata Steel Europe today said that it is in talks with Geneva-based Klesch Group to sell its European Long Products division - including the Scunthorpe steelworks in the UK.
Tata Steel, which expanded to Europe through its $13-billion acquisition of Corus in 2007, said that it has signed an agreement with the Klesch Group for due diligence and negotiations for a potential sale.
The potential sale includes UK-based Scunthorpe steelworks, mills in Teesside, Dalzell and Clydebridge in Scotland, an engineering workshop in Workington and a rail consultancy in York, as well as other operations in France and Germany.
About 6,500 people are employed at Long Products Europe and its distribution facilities. Tata Steel employs 30,500 people across Europe, including 17,500 in the UK.
Karl Koehler, CEO of Tata Steel's European operations, said, "We will now move into detailed due diligence and negotiations, though no assurance can be given about the outcome. We will regularly engage with our employees and other stakeholders throughout this process, and we will consult with the trade union representatives and works councils."
Explaining the context and rationale for this decision, Koehler said, "We've improved the competitiveness of Tata Steel's European operations, including Long Products Europe which now supplies more of the innovative steel rail, rod, plate, sections and special profile products demanded by customers,'' he added.
"Accelerating the pace of innovation on advanced steel solutions, helping our customers succeed in their markets and creating a sustainable asset base requires significant capital and expertise.''
"We have therefore decided to concentrate our resources mainly on our strip products activities, where we have greater cross-European production and technological synergies.''
Tata Steel Europe, the region's second-largest steel producer holding around 45 per cent share in the UK market, said that the European steel industry is emerging from one of the most challenging economic periods in its history.
The climate in Europe towards the steel industry has worsened due to high raw material and energy prices, CO2 allowance trading, Russia's accession to the World Trade Organisation resulting in lower tariffs for Russian steel exports, and in particular the reducing consumption levels in Europe.
Several European steelmakers have resorted to scaling back production, idling plants, and selling non-core assets like Luxemburg-based ArcelorMittal and Germany's Thyssenkrupp.
Last year, Tata Steel said it would spend £800 million ($1.3 billion) at its Welsh facilities over the next five years, including £185 million on rebuilding a blast furnace at Port Talbot, and an additional £53 million on upgrading the steel-making shop.
Tata Steel, the top producer of steel in India, has been trying to pare its huge debt to lower interest costs. It has to repay $5 billion worth of debt by the end of 2015. According to its latest balance sheet, the company has over $14.4 billion of bonds and loans outstanding.
The combined Tata Steel group has crude steel capacity of more than 28 million tonnes and employs around 80,000 people across four continents.
Founded in 1990 by Anglo-American entrepreneur Gary Klesch, the Klesch Group is a global industrial company, which has interests in metals, mining, oil and gas, power generation, chemicals and other traditional "heavy" industries.
It has revenue in excess of €5 billion, and employs more than 2,000 people across 30 locations in over 17 countries around the world.