Tata Steel to review bids for UK unit

Tata Steel has received seven bids for its 4.5-million tonne unit in the UK, of which three have been shortlisted

Tata Steel, the country's largest steel producer, will be holding board meeting in Mumbai on Friday where the management will be discussing bidders' proposals received for the UK unit, sources close to the development told Business Standard today. The meeting which will largely comprise long discussions is not expected to yield any major announcement, they said.

Tata Steel had secured seven bids for its 4.5-million-tonne unit in UK of which three have been shortlisted as per reports. The company's loss-making unit is saddled with a huge liability of British Pension Scheme that applies to 146,000 workers (active and non-active). Because Tata Steel underwrites the pension scheme, this funding drain out has been putting bidders off buying the UK business.

The scheme has assets of 13.5 billion pounds, according to its trustees, and a deficit of about 500 million pounds.

"With a deficit of 500 million pounds, the scheme was still healthy but now after Brexit we have no idea where the pound is going to be and when it will pick up," said Harish Patel, national officer (metals and foundary) at Unite, Britain's largest trade union.

Last week, trade unions in their meeting with Member of Parliament Sajid Javid who is the secretary of state for business were informed that the government would come up with resolution for the pension scheme in the next two weeks. "We do not want the government to make announcements on the scheme in a haste and have asked them to give more time to it," said another trade union source on condition of anonymity. "In the meantime, trade unions would get time to draw up some changes to the existing scheme and negotiate with Tata Steel. We could also suggest an alternative scheme to Tata Steel," he said.

While Tata Steel continues its hunt for a new buyer to its UK unit, trade union sources said that the company may look to keep the loss-making business in partnership with a global company, mostly Germany-based Thyssenkrupp.

Reports that Tata Steel and Thyssenkrupp are in talks for a 50:50 venture in Netherlands business has already been doing rounds since last month.

"The bids that Tata Steel has received are not good and plus no individual company can manage the UK unit. This unit will need support of an international conglomerate and Thyssenkrupp could come into picture here," said the source.

Tata Steel's entire European operations comprises UK unit and Netherlands operations. Of this, the latter has been in earnings before interest, taxes, depreciation and amortisation (EBITDA) positive since acquisition and going ahead too is expected to face less headwinds as it will continue to be part of European Union.