By Alex MacDonald in London and Santanu Choudhury in New Delhi
India-based Tata Steel Ltd. said Monday it has agreed on a potential sale of its specialty steel business in the U.K. to industrial metals firm Liberty House Group for an enterprise value of 100 million pounds ($124.77 million).
The letter of intent covers several South Yorkshire-based assets including Tata's Rotherham electric arc steelworks, the steel purifying facility in Stocksbridge and a mill in Brinsworth as well as service centers in the U.K. and China. The specialty steels division employs about 1,700 people and makes steel for theaerospace, automotive and the oil & gas industries.
The potential sale is in line with Tata Steel's plan announced in the spring to dispose of all its U.K. assets. Tata Steel first entered the U.K. with the purchase of Netherlands-based steelmaker Corus for $12.9 billion in 2007. It invested GBP1.5 billion over the last nine years to turn around the U.K. business but with limited success. This year it sold its European Long Products division, mostly based in the U.K., to Greybull Capital for a nominal sum. It also sold two steel mills in Scotland to Indian business tycoon Sanjeev Gupta's Liberty House earlier in the year.
Mr. Gupta, through Liberty House, has amassed a large footprint in the U.K. over the past year, scooping up metal operations that were either in administration or costly to run. Most recently Mr. Gupta acquired mining giant Rio Tinto PLC's aluminum-related assets in Scotland for GBP330 million.
We "are eager to join....to develop [Tata's specialty steel] business and increase market share, both domestically and internationally using our global presence," said Mr. Gupta, Liberty House's founder and chairman.
The deal is forecast to close early in the first quarter, subject among other things, to due diligence and regulatory approvals.
Liberty Group had also announced its intention to bid for Tata's much larger U.K. flat steel operations before Tata entered exclusive talks with another steelmaker, Germany's Thyssenkrupp AG to create a European joint venture.
Bimlendra Jha, chief executive of Tata Steel UK, said: "We continue to actively seek solutions to the company's structural challenges and work with all stakeholders. Among those challenges, there is the need to develop a more sustainable business in the U.K. as well as a self-sustaining future for the British Steel Pension Scheme."
Pundits say the large liabilities associated with the steelmaker's multibillion-dollar U.K. pension plan have been a key stumbling block in reaching any sales agreements. Last month, the British Steel Pension Scheme said its deficit had narrowed to about GBP50 million from around GBP300 million in March but that risks persist unless a solution is found to manage liabilities over the long term.
Matters have been complicated recently by the ousting of Cyrus Mistry, the chairman of Tata Steel and its parent company, Tata Group, following a row with Tata's founders over the conglomerate's strategic direction.
Write to Alex MacDonald at email@example.com and Santanu Choudhury at firstname.lastname@example.org
(END) Dow Jones Newswires
November 28, 2016 10:42 ET (15:42 GMT)
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