Companies

Dutch unit sale: Tata Steel expects SSAB to complete due diligence by Dec-end

Our Bureau Mumbai | Updated on November 17, 2020 Published on November 17, 2020

TV Narendran, Managing Director, Tata Steel   -  THE HINDU

Sees no objection raising from European Competition Commission

Tata Steel expects Swedish company SSAB to complete the due diligence of its Dutch unit by the end of this year to arrive at a valuation and sign a definitive agreement to acquire the asset.

TV Narendran, Managing Director, Tata Steel, said the company has opened up the data room to SSAB for due diligence, which should have been completed by now but was delayed by the Covid outbreak.

“We expect them to sign a definitive agreement by the end of this year and close the deal after getting all the regulatory approvals,” he added.

Also read: Tata Steel Q2 net halves on higher costs

Unlike the previous deal with Thyssenkrupp, Tata Steel does not expect any roadblock from the European Competition Commission, as the product portfolios of SSAB and Tata Steel Netherlands are different. Tata Steel has about 7.5 mtpa of steel-making capacity at its IJmuiden Steelworks in the Netherlands.

Narendran said the entire sale proceeds will be used to repay part of the €1.7-billion long-term debt on the Tata Steel Europe balance sheet.

Port Talbot turnaround

The deal will ensure that Tata Steel exits the more profitable business in Europe and retain the loss-making Port Talbot business in the UK. The company is in negotiations with the UK government for support to turn around the 3 million tonne Port Talbot plant.

Also read: Tata Steel, Hindustan Zinc ink pact

“It’s not that Port Talbot had never made money, but it is true that it is not making enough money. A lot of work has been done over the last eight years to address the problem,” said Narendran.

The strategy in the UK is to make the business more sustainable with government support, he added.

Key link in value chain

Post Brexit, the UK government will be keen to revive economic activity and steel is an important part of the value chain. Over 50-60 per cent of the steel used in the auto and construction industry in the UK is supplied by the Tata Steel Port Talbot plant and the government will support this business to keep the integrity of the value chain, said Narendran.

In India, he expects the recent rise in operational profit to sustain with a ₹6,000 a tonne hike in auto steel supply renegotiated for the second half of this fiscal.

Also read: Why Adhunik Metalics expects to turn profitable by Jan-end

The company expects to complete the merger of Tata Metaliks and unlisted Indian Steel and Wire Products with Tata Steel Long Products in six to nine months. While the benefit will flow from operational synergy and reduction in cost of owning fewer legal entities, Narendran said, the idea is to have fewer listed entities in the long run.

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Published on November 17, 2020
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