Tata Steel weighs JV with Thyssenkrupp AG for UK business

The Board of Tata Steel Ltd at its meeting on Friday has decided to explore new strategies for its European businesses, including strategic collaborations through potential joint ventures.

Tata Steel said it has entered into discussions with strategic players in the steel industry, including Thyssenkrupp AG, adding that the discussions are at a preliminary stage.

Hit by continuing slump in its European business, Tata Steel, on 9 March, announced plans to explore strategic alternatives, including potential sale of the business as a whole or in parts.

The company and its advisers then contacted around 200 potential financial and industrial investors around the world to explore their interest in the business. The company has also deeply engaged with the governments of the UK and Wales at every stage of the process.

The company considered seven expressions of interest for a possible sale process and these companies were given access to extensive business information and management team presentations in order for them to progress their interest and submit refined bids.

However, Tata Steel said, the bids received have not been found to be based on the commercial value and prospects of the UK business for a range of stakeholders. The bids have also been reviewed in the light of the uncertainties caused by the UK referendum and the outcome of the UK government's consultation on the British Steel Pension Scheme, it stated.

Taking the above issues into account, the board of Tata Steel has now decided to also look at alternative and more sustainable portfolio solutions for the European business.

Consequently, Tata Steel has now entered into discussions with strategic players in the steel industry, including Thyssenkrupp AG (See: Tata Steel in talks for stake in Germany's ThyssenKrupp).

Discussions are currently centered on the feasibility of strategic collaborations through a potential joint venture, the company said, adding that the talks are at a preliminary stage and there can be no certainty of a transaction as the outcome depends on consultation and negotiations with various stakeholders.

''We have initiated conversations for a strategic collaboration for our European business. A potential strategic combination of strip products businesses offers the best prospects to create a premium, world-class strip steel business with the scale and scope of capabilities to compete successfully on the global stage,'' Koushik Chatterjee, group executive director and Tata Steel's executive director for Europe, said.

However, Chatterjee said there cannot be any assurances about the success of these talks and that the inclusion of the UK business in the potential joint venture would depend on several issues, including finding a suitable outcome for the British Steel Pension Scheme, successful discussions with the UK trade unions and the delivery of policy initiatives and other support from the governments of the UK and Wales.

These are necessary for realising a sustainable business in the UK.

Meanwhile, Tata Steel said, the management team and the employees of the company are also continuing to improve the underlying performance of our European business which is very encouraging.

''We continue to be actively engaged with both the UK and the Welsh governments, the trade unions and the Pension Trustees,'' Chatterjee added.

''As part of this development in our European strategy, we will now also begin separate processes for the potential sale of the South Yorkshire-based Speciality Steels business and the Hartlepool pipe mills (other than the 20-inch Tube Mill) in the UK. Both of these operations are largely independent of the strip products supply chain with their own specific characteristics. Tata Steel UK has already received interest from several bidders for Speciality Steels and the pipe mills in each case and a formal process will be commencing shortly,'' Chatterjee stated further.

''This is a welcome development, not just for Tata Steel but also for the European steel sector more broadly. Although there's much work still to be done on any strategic collaboration I'm confident that the direction is the right one – towards higher performance and capability to serve customers. We will continue to communicate with our employees and inform and consult both works councils and trade unions as these discussions develop,'' Hans Fischer, chief executive of Tata Steel Europe, commented.

The Tata Steel Ltd board at its meeting also reviewed the performance of the European business and said it would continues to support the business so that Tata Steel Europe can secure the supply chain to customers of the premium steel products they demand and maintain strong relationships with other stakeholders.