Britain finds buyer for one of Tata steel plants
Prime Minister David Cameron has been under pressure to keep the plants open to save jobs after Tata, one of the world’s biggest steelmakers, said on March 30 it would sell its loss-making British business.
As Tata formally appointed advisers for the sale of its steel assets in Britain, turnaround specialist Greybull Capital LLP said it would buy the Indian company’s Long Products Europe division in Scunthorpe, northern England, which employs 4,400. It declined to rule out further purchases of Tata’s British steel assets, including its plant at Port Talbot in Wales, while British Business Secretary Sajid Javid said the government would consider jointly investing with a buyer to secure the sale of the Indian group’s other UK assets.
“I’ve been in contact with potential buyers, making clear that the government stands ready to help,” Javid told parliament. “This includes looking at the possibility of co-investing with a buyer on commercial terms.”
The sale to Greybull – for a nominal pound or 1 euro – includes a 400 million pound ($570 mln) investment and financing package for the Scunthorpe business, as well as agreements with suppliers and unions on cutting costs. “We’re expecting no redundancies going forward, the business plan calls for no redundancies,” Greybull co-founder Marc Meyohas told reporters on a conference call.
The Greybull deal, which is subject to a ballot by union members, includes two additional mills, an engineering workshop and a design consultancy in Britain, plus a mill in Hayange, in northeast France. The purchase will see the business renamed ‘British Steel’, in a revival of a historic name last used almost two decades ago.
Cameron, already grappling with a divided ruling party ahead of a June 23 referendum on membership of the European Union, has been scrambling to try to find buyers for Tata’s steel operations, to save jobs. Britain’s eurosceptic media has blamed Brussels for preventing London from taking greater steps to protect the steel industry, while the opposition Labour Party has called on Cameron to do more to save the plants.
Tata, which owns iconic brands such as Jaguar Land Rover and Tetley Tea, is offloading its British steel operations, citing a global oversupply of steel and cheap imports from China, high costs and weak domestic demand.
The deal for the Scunthorpe plant, which Tata had been trying to sell since 2014 before revealing talks with Greybull were underway in December, is expected to complete in eight weeks subject to certain conditions being met. Greybull, which is not taking on pension liabilities, said about half of the 400 million pound package would come from shareholders of Greybull and half from banks and government loans.
“We’re expecting the company to be profitable in year one and that’s very much the management plan,” said Meyohas, who co-founded Greybull in 2008 after 12 years as CEO of technology services company Cityspace.
Though the deal is positive for the Scunthorpe workers, there is deep unease in Port Talbot, Britain’s biggest steel plant, where 4,000 people could be out of a job if Tata fails to find a buyer. Tata appointed KPMG as adviser on the sale process for its UK assets while Slaughter and May was appointed its legal adviser on the sales.
“While very welcome it does not mean that we are out of the woods yet,” said Gareth Stace, director of trade association UK Steel. “A long-term investor is needed, in the very short term, for the remainder of the whole of the Tata Steel UK business, including Port Talbot,” said Stace.