Tata Steel UK to sell speciality steels business to Liberty House for £100 mn
28 November 2016
Tata Steel UK is selling its its speciality steels business for £100 million to Liberty House, the metals company run by tycoon Sanjeev Gupta, as part of a rejigging of its UK steel operations, which also include Britain's largest steelworks in Port Talbot, south Wales.
Tata Steel UK today announced the signing of a letter of intent (LoI) with Liberty House Group to enter into exclusive negotiations for the potential sale of its Speciality Steels business for an enterprise value of £100 million, in a move that will safeguard 1,700 steel jobs in the UK.
The sale, however, is subject to due diligence and corporate approvals.
The LoI covers several South Yorkshire-based assets, including the Rotherham electric arc steelworks, the steel purifying facility in Stocksbridge and a mill in Brinsworth as well as service centres in Bolton and Wednesbury, UK, and in Suzhou and Xi'an, China.
Speciality Steels employs about 1,700 people making steels for the aerospace, automotive and the oil and gas industries.
''The Speciality Steels business is independent of the pan-European strip products supply chain and today's announcement is in line with the overall restructuring strategy of the UK portfolio. This is an important step forward in seeking a future for Speciality Steels and we have reached this stage thanks to the efforts of employees, trade unions and management. We now look forward to working with Liberty on the due diligence and other work streams so that the sale can be successfully concluded,'' Bimlendra Jha, CEO of Tata Steel UK, said.
''We continue to actively seek solutions to the company's structural challenges and work with all stakeholders. Among those challenges, there is the need to develop a more sustainable business in the UK as well as a self-sustaining future for the British Steel Pension Scheme,'' he added.
Tata Steel UK said it has invested £1.5 billion of capital over the last nine years. ''The company's boards consider the technical feasibility and economic returns of investments when taking decisions, as well as their affordability. The company is pursuing a transformation plan to create a sustainable future for its UK strip products business. The success of this plan is likely to influence decisions on future investments'', the company stated in a release.
In the current year, the company is pursuing £85 million worth of capital investments covering a range of sustenance and improvement schemes. Tata Steel has recently approved schemes focused on improving manufacturing capability to enable the production of premium steels in Shotton, Llanwern, Trostre, Orb in Newport, and other downstream operations as well as environmental schemes for Port Talbot's power plant. Investments in packaging steels, electrical steels, an automotive finishing line, laser welding and next-generation coated products are in line with our strategy to enhance our premium product focus for our UK strip products supply chain, the company said.
The speciality steels business is under investigation by the Serious Fraud Office over forgery allegations, which led to the managing director of the business being suspended. Its primary sites are in Rotherham, Bolton and Stocksbridge near Sheffield.
Tata Steel is still understood to be keen to keep the rest of the UK business, including the strip products arm based in Port Talbot, and is in talks with German company ThyssenKrupp about merging their European steel operations. However, it needs to agree with the UK government, the Pensions Regulator, and pension trustees about the future of the British Steel pension scheme, which has liabilities of £15 billion.