Tata Steel cancels sale of its Port Talbot business

Company in JV talks with ThyssenKrupp for entire Europe business

Putting an end to speculations, Tata Steel on Friday announced it has cancelled sale of its UK business and initiated talks with Germany-based ThyssenKrupp AG for a possible joint venture for its Europe business, including UK operations.

The announcement has come after the company screened around 200 potential financial and industrial investors for the sale of its loss-making UK operations. “The Board of Tata Steel has decided to also look at alternative and more sustainable portfolio solutions for the European businesses. Consequently, Tata Steel has now entered into discussions with strategic players in the steel industry, including ThyssenKrupp AG. Discussions have been initiated to explore the feasibility of strategic collaborations through a potential joint venture (JV),” it said in a statement.

“However, the talks are currently at a preliminary stage and there can be no certainty of a transaction as the outcome depends on consultation and negotiations with various stakeholders.”

The company decided to keep its Port Talbot steelworks, a major employer in south Wales with about 4,000 workers, noting that executives “continue to be actively engaged with both the UK and the Welsh Governments, the trade unions and the Pension Trustees”. Separately, the company has started process for the sale of the South Yorkshire-based Specialty Steels business and Hartlepool pipe mills (other than the 20-inch Tube Mill) (both in UK).

Tata Steel’s Executive Director for Europe Koushik Chatterjee said: “We have initiated conversations for a strategic collaboration for our European businesses. A potential strategic combination of strip products businesses offers the best prospects to create a premium, world-class strip steel business with the scale and scope of capabilities to compete successfully on the global stage.”

Chatterjee, who is also the Group CFO of Tata Steel, said it is “too early to give any assurances about the success of these talks”.

“Such success, especially inclusion of the UK business in the potential JV, would depend on several issues including finding a suitable outcome for British Steel Pension Scheme (BSPS), successful discussions with the UK trade unions and the delivery of policy initiatives and other support from the Governments of the UK and Wales,” he added.

On the sale of the Speciality Steels business, he said: “As part of this development in our European strategy, we will now also begin separate processes for potential sale of the South Yorkshire-based Specialty Steels business and Hartlepool pipe mills (other than the 20-inch Tube Mill) in the UK.” Both of these operations are largely independent of the strip products supply chain with their own specific characteristics, he added. Tata Steel UK has already received interest from several bidders for Specialty Steels and the pipe mills in each case and a formal process will be commencing shortly.

According to ITV News, UK Business Secretary Sajid Javid said: “Tata’s news today that they intend to explore strategic alternatives including a possible joint-venture with Thyssenkrupp AG is encouraging, as is the fact that they have decided to separately sell their specialty steel and pipe businesses in Rotherham, Stocksbridge and Hartlepool. We will continue to work closely with Tata to find a long-term solution for sustainable blast furnace steel manufacturing in Port Talbot.”

Tata Steel Europe CEO Hans Fischer said: “This is a welcome development, not just for Tata Steel but also for the European steel sector more broadly. “Although there’s much work still to be done on any strategic collaboration I’m confident that the direction is the right one — towards higher performance and capability to serve customers.” Tata Steel Board in its meeting in Mumbai on Friday also reviewed the performance of the European business.

In March, Tata Steel had announced the sale of its 10.5 million-tonne UK business of which it managed to do away with 4.5 million tonne long products unit to Greybull Capital. In May, seven expressions of interest were taken forward to the next stage of a possible sale process.