Mistry says Tata Steel Europe, Thyssen deal under cloud due to Tata

Tata was against the decision to restructure Tata Steel Europe ops, says Mistry in NCLT petition

Ousted Tata Sons chairman Cyrus Mistry has accused current Interim Chairman Ratan Tata of trying to jeopardise the restructuring of Tata Steel’s European operations, which hinges on a merger with ThyssenKrupp.

Tata, Cyrus has said, wanted to continue with the European operations — despite sagging finances — and thus, undermined the management’s ability to negotiate with ThyssenKrupp, the pension trustees, pension regulators and other stakeholders.

In the petition filed with the National Company Law Tribunal on Tuesday, Mistry’s investment companies said Tata Steel had acquired Corus Steel at a very high price of $12 billion. Separately, a substantial infusion of funds was required to ensure that the assets of Corus were of very high quality, and, in the last three years, the required funds were infused in the company. After investments, the Netherlands plant was successful but the UK plants continued to do badly.

 

Early this year, the losses of Tata Steel UK increased significantly and Mistry said he initiated talks with the UK government, the pension trustees, the pension regulators, and unions to restructure the operations. 

Discussions were also held for a merger of the entire Tata Steel Europe with ThyssenKrupp, subject to the operations of Tata Steel UK being viable.

“However Tata was completely against the decision to restructure the Tata Steel Europe operations and irrespective of its financial performance, wanted to continue with its operations, thus jeopardising the merger talks with Thyssen,” Mistry said in his petition. 

This implies the merger negotiations are now uncertain under Tata.

After Mistry was ousted, Tata Steel, in fact, had announced an additional investment of £1 billion into its British operations to save around 11,000 jobs. In return, Tata Steel Europe wants to close the costly pension scheme to future accruals and replace it with a defined contribution scheme. Unions will vote on this proposal next month.

Tata Steel has already taken an impairment of Rs 35,000 crore in Corus and a capital employed of Rs 75,000 crore on which it is highly unlikely that shareholders will ever see any return, Nusli Wadia, an independent director of Tata Steel, said in a letter to the shareholders on Wednesday. A source said Tata Steel Europe will still need to deposit another £500 million into the pension fund before the fund removes its lien over its assets so that a merger can go ahead. 

In his petition, Mistry said the fact that he was desirous of restructuring European operations was one more reason for his unceremonious ouster from Tata Sons board as chairman. 

Referring to Tata, Mistry said for someone who does not have any personal stake, it is very convenient to take umbrage or be opposed to an action to stem bleeding from Tata Steel Europe. “It is really the real stakeholders who are suffering on account of the deal… Continuing losses of Tata Steel Europe impacts the ability of Tata Steel to pay dividend, which in turn impacts Tata Sons to pay dividend to the petitioners,” Mistry said.