Following four months of intense negotiations, Tata Steel UK has finalised a deal with London-based Greybull Capital to sell its struggling long products division for a “nominal consideration”.
The sale covers several UK-based assets, including the Scunthorpe steelworks, two mills in Teesside, an engineering workshop in Workington, a design consultancy in York, associated distribution facilities, as well as a mill in northern France.
The Indian steel major, which is exiting its loss-making European businesses, has appointed KPMG as the adviser to sell its entire investment in the UK. Slaughter and May will be the legal advisers.
“The formal process has commenced on Monday with the despatch of the Summary Information Memorandum to potential investors,” said Tata Steel in a statement on Monday.
Tata Steel has a production capacity of 13 million tonnes in Europe and has made a provision of ₹7,000 crore for the struggling assets.
As of September 30 last year, Tata Steel’s consolidated debt was ₹71,798 crore, including long-term debt of €3 billion in its European business.
Tata Steel Europe intends to run a “thorough and expedited sale process” by reaching out to potential investors globally, the statement said.
Last month, the Tata Steel board dismissed an expensive revival plan for its European operations and advised its subsidiary to find a suitor as the company is said to be losing £1 million a day.
Incidentally, KPMG and Slaughter and May also advised Tata Steel UK on the divestment of its long products division in the UK to Greybull Capital.
The dealGreybull Capital signed an exclusive agreement with Tata Steel last December after the Klesch Group withdrew from a similar memorandum of understanding to buy the assets.
Tata Steel expects the deal with Greybull to be completed once the outstanding conditions, including transfer of contracts, certain government approvals and the satisfactory completion of financing arrangements, are resolved. The long products Europe business employs 4,800 people (4,400 in the UK and 400 in France), said Tata Steel Europe in a statement.
Besides paying a nominal consideration, Greybull Capital will take the liabilities associated with the asset and secure an appropriate funding package.
‘Best possible outcome’Bimlendra Jha, Executive Chairman of the standalone long products Europe business, said the sale is the best possible outcome for employees, who have worked to ensure the business survival and helped to make it attractive to a potential buyer.
The successful completion of the sale would pave the way for continuing steelmaking in Scunthorpe and steel processing in other locations in the UK and France, he said.
Hans Fischer, Chief Executive of Tata Steel’s European operations, said that given the challenging market conditions in Europe, with soaring imports from China, the deal has entered the final stage of completion of the sale of shareholding in Longs Steel UK.