Tata Steel UK (Tata Steel) today signed a definitive sale agreement to sell certain assets of Teesside Cast Products (TCP) to Sahaviriya Steel Industries UK (SSI), a subsidiary of Thailand’s largest steel producer, in a deal valuing the business at $469 million.
In August last year, a draft agreement was signed between the two parties and the deal was at the time was valued at £320 million or around $520 million. Company executives in the UK could not be reached for comments on the lower valuation of the deal today.
Tata Steel Europe had put TCP on the block after the consortium of four companies backed out of its off-take agreement for TCP’s special steel citing global turmoil two years back. Today’s move brings to end a 22-month search for a buyer for the beleaguered plant in the north east of UK since a consortium of steel buyers walked out of a 10-year contract. TCP was partially mothballed in February 2010 year. The contract had helped Corus sell nearly 80 per cent of the plant’s total output, which explains the need for mothballing when the deal was snapped. Between April and December 2009, TCP lost around £150 million due to the terminated contract.
In a statement issued today, Tata Steel Europe said the next step will be the completion of the transaction, which will take place by the March-end.
Karl-Ulrich Köhler, managing director and CEO of Tata Steel in Europe, said: “I am very encouraged that after all our efforts we have been able to reach this agreement, which is good news for the highly skilled and dedicated Teesside workforce. I should point out that Tata Steel intends to retain a major presence in Teesside. After the successful completion of this transaction, Tata Steel will remain one of the largest private-sector employers in the area with more than 1,800 employees.”
Win Viriyaprapaikit, President of SSI, said: “This is a historic moment for both Teesside and SSI, one that would not have been possible without the local community’s passion for steel-making and the help of the UK Government. We look forward to resuming production of the top quality slab for which the plant is renowned as soon as possible.”
The UK Business Secretary, Vince Cable MP, said: “I welcome the return of steelmaking to this historic steel site later this year. Coming just over a year after the plant was mothballed, it is a tribute to both companies involved – Tata Steel and SSI. Both parties have worked hard since August to reach a successful outcome on what has been a complex negotiation. This is a significant inward investment by SSI which will help to sustain the 700 jobs at the plant and create new ones at the site and the wider local economy.”
The assets covered by the sale include the Redcar Blast Furnace, the Redcar and South Bank coke ovens, TCP’s power generation facilities and sinter plant, and the Lackenby steelmaking and casting facilities. The deal will also result in Tata Steel and SSI entering into a joint venture to operate Redcar Wharf (TCP’s bulk terminal), giving Tata Steel the flexibility to use Teesside to serve its other steelmaking operations, while also meeting SSI’s requirements on Teesside.
The news release from Tata Steel said it will continue to operate two large-diameter tube mills in Hartlepool, the Skinningrove special sections mill, Teesside Beam Mill and Teesside Technology Centre.
Jimmy Skivington, GMB (union) Regional Organiser for Engineering on Teesside, said: “GMB welcome the fact that there will be an announcement this afternoon that the steel making plant at Redcar is to re-open with the prospect of between 600 to 800 jobs in a hard pressed community that has suffered badly from the bankers recession. The Redcar and wider Teesside communities have endured a real hard time over the last few years. Many hard working people and their families have suffered unnecessarily from unemployment, reduced income and life chances.”
“The prospect of losing vital manufacturing skills built up over generations was a body blow to the area. It is vital that Redcar in particular and Teesside in general is not allowed to become a low wage low skill economy. We need a diverse range of skills indigenous to this area that are enabled, supported and invested in. That is why we welcome the prospect of over 600 skilled workers getting the chance once again to put their vital skills into practice,” Skivington added.
Tata Steel had said it would continue to pursue legal action against the consortium.
