 "Tata Steel UK's speciality steel business sale put on hold")
The sale process for Tata Steel UK’s speciality steel business has been put on hold following the change of guard at Tata Sons.
Meetings between buyers and Tata Steel management were scheduled for next month, but bidders are already sceptical about the outcome after the sudden change of leadership, said a person familiar with the sale process. “Bidders were not sure whether the meetings would happen and even if it did happen, there was apprehension that the sale process would be called mid-way.”
However, that uncertainty has been put to rest, as sources said the interim chairman, Ratan Tata, is against selling the UK business in whole or in part.
Even when Tata Steel changed tack about its European business in July, it had said that it would begin a 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.
“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,” the company’s July statement read.Meetings between buyers and Tata Steel management were scheduled for next month, but bidders are already sceptical about the outcome after the sudden change of leadership, said a person familiar with the sale process. “Bidders were not sure whether the meetings would happen and even if it did happen, there was apprehension that the sale process would be called mid-way.”
However, that uncertainty has been put to rest, as sources said the interim chairman, Ratan Tata, is against selling the UK business in whole or in part.
Even when Tata Steel changed tack about its European business in July, it had said that it would begin a 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.
According to persons familiar with the development, while the speciality steels business had a good product mix, it was a loss-making unit primarily because of high energy costs.
“The production is through the electric arc furnace, which is an energy intensive technology,” they said. The capacity of the speciality business was around 1.2 million tonnes and could have fetched Tata Steel around £100 million.
Together, the speciality and pipe mills employ around 2,000 people.
Sources indicated that Tata, who had always batted for Indo-UK business ties, was opposed to further job losses. Since 2007, several restructuring initiatives have been taken, which affected jobs across facilities.
In May, Tata Steel completed the sale of its long products Europe business to Greybull for a mere £1.
Earlier in the year, the Tata Steel board had reviewed the performance of the European business, which it acquired in 2007 for $12 billion, and directed Tata Steel Europe to explore all options for portfolio restructuring, including the potential divestment of Tata Steel UK, in whole or in parts.
Accordingly, the company and its advisors contacted 200 potential financial and strategic investors, of which seven bidders were shortlisted. However, after the UK referendum, the company called off the sale process and entered into discussions with strategic players in the industry, including Thyssenkrupp AG for a joint venture to create a world-class strip steel business.
There was also a possibility that the UK business would be included in the joint venture, subject to the outcome for the British Steel Pension Scheme and support from the governments of the UK and Wales.
At a meeting with company CEOs on Tuesday, Ratan Tata had said: “We will evaluate and continue to undertake those that are required to. If there is any change, they will be discussed with you,” which was being interpreted as a halt to any sale process.