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JSW Steel shortlisted to take over Tata Steel's UK biz

Other bidders include commodities trading group Liberty House, investment firm Greybull and US steelmaker Nucor, among others

Tata Steel

BS Reporter  |  Mumbai 

The logo of JSW is seen on the company's headquarters in Mumbai. Photo: Reuters
The logo of JSW is seen on the company's headquarters in Mumbai. Photo: Reuters

JSW Steel is one of seven bidders that has selected for the next stage of the sales process of its UK operations, the Financial Times reported on Tuesday, reviving hopes that the operation, which employ 11,000 people, might yet be saved. Should JSW be successful, it would mean the collection of factories passing from the hands of one Indian owner to another.

JSW’s capacity is nearly twice that of Tata Steel’s Indian operations, trailing only state-owned Steel Authority of India. In recent weeks, Indian media reports have also linked it with a possible bid for struggling Indian peer Essar Steel. However, its expansion drive was recently met with a credit downgrade from Fitch amid concerns over its debt.

JSW did not comment on whether it was bidding for Tata Steel’s UK business.

Other bidders for include commodities trading group Liberty House and Greybull, the investment firm which has provisionally agreed to acquire Tata’s Scunthorpe steelworks.

Also on the list is a Chinese group and US steel producer Nucor, according to a person with knowledge of the process. A Nucor spokeswoman declined to comment but said: “Like most companies, we are always looking for good opportunities.”

She added: “We never limit ourselves when looking at the future, and are constantly evaluating unique market opportunities or product niches. If the right opportunity comes along, it has to fit our long-term growth strategy and provide the right return on the investment of our shareholders’ valuable capital.”

A management buyout team called Excalibur, led by senior managers from UK, is also thought to be among the seven. A spokesperson declined to comment.

Bidders who only wanted to buy parts of Tata’s operations piecemeal were excluded from the next round.

One was Albion Steel, a start-up including a former Corus chief executive, which was interested in Tata’s specialist steels unit in South Yorkshire.

A spokesperson for Tata Steel said: “The board of Tata Steel Europe has announced that seven expressions of interest submitted for Tata Steel’s UK business have been immediately taken forward to the next stage of the sale process. In addition, Tata Steel Europe is clarifying outstanding points with a number of other parties who have submitted an expression of interest.”

The future of Britain’s steel industry was plunged into doubt when Tata said it would seek to withdraw from the country at the end of March, following years of losses.

Despite pouring more than £1.5bn of investment into the former Anglo-Dutch steelmaker Corus, which it acquired for £6.2bn in 2007, the Indian group has described its UK business as almost worthless. Tata Steel’s group executive director, Koushik Chatterjee, last month said that its UK business was losing as much as £1m a day.

This is yet further evidence of the significant interest that exists in the future of the UK steel industry

UK steel producers have been hit by falling steel prices, high energy prices and persistently weak European demand, triggering a crisis that has claimed thousands of jobs and led to plant closures in the past year.

The resulting political pressure led the government to offer to part-nationalise up to a quarter of Tata Steel UK alongside hundreds of millions of pounds in loans.

A £15bn pension scheme, which has 130,000 members and a £485m deficit, is an obstacle to any sales, with at least two prospective buyers saying they would not want to take it on.

Following due diligence, the next step is for bidders to table a firm offer, said one person involved in the process. Tata has pushed back its final deadline to offload the collection of factories beyond Britain’s EU membership referendum on June 23.

A spokesperson for Community, the steelworkers’ union said: “This is yet further evidence of the significant interest that exists in the future of the UK steel industry. Community will continue to act as a responsible stakeholder in the sales process.

“We will ensure that all potential investors recognise the importance of Tata’s highly skilled workforce to any future success of the business.”

The broader JSW Group was named by Credit Suisse in October as one of ten Indian groups facing severe difficulty in managing their liabilities.

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First Published: Tue, May 10 2016. 11:51 IST