Tata Steel starts UK biz sale, divests long products ops to Greybull Capital

Tata Steel on Monday kickstarted the sale process for its cash-guzzling UK business with divestment of Long Products Europe business unit to investment firm Greybull Capital for a “nominal” amount.

The embattled steelmaker also appointed KPMG LLC as process advisors as well as Slaughter and May as the legal advisors for “thorough, but expedited sale” of the entire shareholding in its subsidiary Tata Steel UK.

Tata Steel UK on Monday announced “signing of an agreement to sell its Long Products Europe business to family investment office, Greybull Capital.

“Sale for a nominal consideration, would be in exchange for Greybull Capital taking on the whole of the business, including assets and relevant liabilities, and securing an appropriate funding package.” 

The deal would be completed once a number of outstanding conditions have been resolved, including transfer of contracts, certain government approvals and the satisfactory completion of financing arrangements, it added.

The Long Products Europe business employs 4,800 people - 4,400 in the UK and 400 in France. On the sales process, it said following the advice from the Tata Steel Board to evaluate all options for the portfolio review of Tata Steel UK, the Board of Tata Steel Europe at its meeting held on March 31, 2016 reviewed several options. Keeping in view the interest of all stakeholders, the Board (Tata Steel Europe) has “decided to commence the process of divestment of its entire shareholding in its subsidiary Tata Steel UK.” 

In December last year, Tata Steel said it has signed a Letter of Intent with Greybull Capital to enter into exclusive negotiations for potential sale of Long Products Europe.

Executive Chairman of the Long Products Europe business Bimlendra Jha said: “This sale is the best possible outcome for employees who have worked relentlessly to ensure the business s survival, and helped to make it attractive to a potential buyer.”  The agreement follows negotiations between Tata Steel UK and Greybull Capital and is an important milestone towards continuing steelmaking in Scunthorpe and steel processing in other locations in the UK and France, the India giant said.

Tata Steel Europe CEO Hans Fischer said: “Under these current challenging market conditions in Europe with the soaring levels of imports from China, we are happy that Tata Steel UK and Greybull Capital have entered the final stage of completion of the sale of shareholding in Longs Steel UK.” This transaction will offer a future for Long Products Europe business and its 4,400 employees in the UK, he added. The sale covers several UK-based assets including the Scunthorpe steelworks, two mills in Teesside, an engineering workshop in Workington, a design consultancy in York and the associated distribution facilities, as well as a mill in northern France. On the sale of the entire UK business, Tata Steel Europe said: “It is the intention of Tata Steel Europe to run a thorough, but expedited sale process by reaching out to a wide universe of potential investors globally.” 

The formal process has commenced “Monday” with despatch of the Summary Information Memorandum to potential investors, it added.