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Tata Steel starts talks with Liberty House to sell UK speciality steel biz

02 December, 2016

Tata Steel Ltd said on Monday it has agreed to negotiate the potential sale of its UK speciality steel business to Liberty House Group for £100 million ($124 million or Rs 853 crore) including debt.

The move is in line with the overall restructuring strategy of the UK portfolio, Tata Steel UK CEO Bimlendra Jha said in a stock-exchanging filing.

The speciality steel business is based largely in South Yorkshire and has service centres in the West Midlands and Lancashire as well as in China. It employs about 1,700 workers and makes a range of high-value speciality steel products for the automotive, oil and gas, and aerospace sectors. Tata Steel said it has invested £1.5 billion over the past nine years in its UK steel business. 

The deal is subject to due diligence and regulatory approvals, among other things. Liberty House and Tata Steel expect the acquisition to complete early in the first quarter of 2017. 

Liberty House, which is being advised by Macquarie Capital (Europe) Ltd on the deal, makes and distributes steel products and specialises in metal trading and has revenue of $4.3 billion.

Meanwhile, the decision to engage in talks with Liberty House comes at a time when the Tata group has been in turmoil since the ouster of Cyrus Mistry as the chairman of holding company Tata Sons Ltd in October. 

Last week, Tata Steel also removed Cyrus Mistry as chairman and replaced him with independent director OP Bhatt. The company is moving to replace Mistry and independent director Nusli Wadia by calling a meeting of shareholders. 

Mistry had previously labelled Tata Steel as a ‘legacy hotspot” because of the debt the company racked up after its expensive Corus acquisition in 2007.

Asset sale timeline

Tata Steel had previously tried to sell various parts of Corus since 2010 when it appointed Citibank to find a buyer for the UK plants. It put its entire UK business on the blockin March this year, as it started the process to exit its loss-making European operations nine years after acquiring the Anglo-Dutch steelmaker Corus Group Plc for almost $12 billion.

The same month, Tata Steel sold the Clydebridge and Dalzell Steel Plants of Tata Steel Europe Ltd to the Scottish government. The mills were subsequently acquired by Liberty House.

In April, Tata Steel agreed to sell its European long products business to investment firm Greybull Capital.  According to a report by The Guardian, the business was sold for a nominal amount of £1 pound, although Greybull said it had lined up £400 million to invest in the entity.

In June, Liberty House joined hands with management buyout firm Excalibur—led by former chief of Tata Steel’s Port Talbot plant Stuart Wilkie—to bid for Tata Steel’s UK business. However, it put the sale of its UK business on hold in July amid the uncertainty after Britain’s shock decision to leave the European Union.

Tata Steel then said it had initiated talks with German steelmaker ThyssenKrupp AG for a possible joint venture for its Europe business, including UK operations.  

At the time, Tata Steel’s European executive director Koushik Chatterjee had said that a potential strategic combination of strip products businesses offered the best prospects to create a world-class strip steel business. Also, the company had then decided to find buyers for its speciality steel business separately, a move that has now led to exclusive negotiations with Liberty House.

Tata Steel is now pursuing a ‘transformative plan’ for its UK strip products business and future investments would depend on the success of this plan, the company said on Monday. 

As part of this, it is pursuing £85 million worth of capital investments for its various premium steel plants including Port Talbot power plant. Investments in packaging steel, electrical steels,  automotive finishing line, laser welding and next generation coated products, is part of the company’s strategy to focus on premium line for its UK strip products business, it said.

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Tata Steel starts talks with Liberty House to sell UK speciality steel biz

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