Tata Steel UK
has entered into exclusive negotiations with Liberty House
of its loss-making speciality steels business for an enterprise value of 100 million pounds.
In a notification to the exchanges on Monday, Tata Steel said it had signed a letter of intent for the downstream business with Liberty House.
makes steel for the aerospace, automotive, and the oil and gas industries.
“Today's statement is in line with the overall restructuring strategy of the UK portfolio,” the release quoted Bimlendra Jha, chief executive officer, Tata Steel UK, as saying.
“We now look forward to working with Liberty House
on the due diligence. We will continue to work closely with trade unions and will communicate any material news on this issue,” he said.
The letter of intent covers several South Yorkshire-based plants, including the Rotherham electric arc steelworks, the steel purifying facility in Stocksbridge and a mill in Brinsworth as well as service centres in Bolton and Wednesbury in the UK and in Suzhou and X'ian in China.
“The speciality business never fitted into the overall arrangement of the UK business plan and so we were expecting this move and welcome it. This has brought about some stability to the jobs of 1,700 workers at the unit,” Harish Patel, national officer at Unite, Britain's biggest trade union, told Business Standard.
In May this year, Tata Steel UK
completed the sale
of another loss making unit, the 4.5 million tonne long products division, to investment firm Greybull Capital for a nominal consideration. The deal managed to save 4,800 jobs at the unit.
is a respected company in the region. We will now be asking Sanjeev Gupta (chairman of Liberty House) to detail us on the job security aspects along with investment plans for the business,” Patel added.
“There is a need to develop a more sustainable business in the UK as well as a self-sustaining future for the British Steel Pension Scheme,” Jha was quoted as saying.
Tata Steel UK
said it had invested 1.5 billion pounds of capital in the business over the last nine years.“The company is pursuing a transformation plan to create a sustainable future for its UK strip products business.The success of this plan is likely to influence decisions on future investments,” it said.
“The good part of this sale
is that Tata Steel Europe's annual losses will come down. Since the speciality unit is not a subsidiary of Tata Steel UK, only the business will go to the buyer. If there is any debt it will remain with Tata Steel,” said Giriraj Daga, portfolio manager with Visaria Securities.