Liberty House is ahead of others to acquire Tata Steel's speciality and pipe businesses that could save close to 2,000 jobs. According to a report, an agreement to buy Tata’s units based in Rotherham, Stocksbridge and Hartlepool could come at the earliest. According to sources, the negotiations were at “critical and delicate” stage. Liberty is understood to have secured financial backing for the deal from investment bank Macquarie.
If finally an agreement is signed, it would be good news for the UK steel sector, which has suffered thousands of job losses in the past year at the hands of the global crisis in the industry caused by over supply and dumping by Chinese producers.
Tata sold its Scunthorpe plant for a nominal £1 - and took a hit on the deal which dragged it into the red. Tata released quarterly results which showed the company’s loss had hugely widened, with it running up a 31.8bn rupee (£358m) net loss in the months to the end of June, having taken a huge hit on the sale of its Scunthorpe plant.
The numbers revealed the Indian giant took a £370m charge on the sale of the plant to turnaround investor Greybull. That deal – for a token £1 – saved more than 4,000 jobs at Tata’s Scunthorpe steelworks, which now operates as British Steel. The figures also showed that Tata's European steel operations were £90m in the black.
The sales process for the speciality and pipe businesses began in March this year when Tata announced it was selling its entire UK operation as the global crisis in the steel industry meant its UK business was losing as much as £1m a day. However, bidders were discouraged by the near-£15bn pension scheme linked to the business and Tata performed a partial u-turn, halting the sale. Instead it said it was exploring a tie-up with rival Thyssenkrupp for its European operations, while still selling its UK pipe and speciality units.
One source close to negotiations said: “Liberty is a rescue bidder because Tata will close them if it can’t sell them.” The latest bid is understood to have a “realistic” price attached of less than £100m, rather than a nominal sum as was the case with the Scunthorpe sale.
Liberty, run by entrepreneur Sanjeev Gupta, is understood to believe Tata’s businesses have a number of synergies with its current operations. Liberty picked up several of Caparo’s businesses when the industrial group collapsed last October and these are understand to operate in similar areas. A spokesman for Tata said: “The sale process continues with a number of interested parties.”
Quarterly result showed that production of liquid steel declined nearly 16% as it shifted focus from being a volume player to that of a value player. Value added products rose 8% in the quarter, with it now comprising 35% of Tata Steel Europe's sales. Profit at Tata Steel's India unit rose 35% to £57.5 million on revenues of £10.32 billion. Realisations per tonne stood at £10.45 billion, 19% higher compared to Q1FY16. The company, which invested £111.8 million in the April-June quarter to complete the new 3-million-tonne plant in Kalinganagar, Odisha, expects its Q2FY17 realisations to be affected by lower demand from large steel-consuming sectors such as construction and capital goods as well as seasonal sluggishness due to monsoons.
“Demand is expected to pick up post monsoon and the festive season on the back of increase in disposable income due to pay commission award, good harvest and easier liquidity,” said Tata Steel MD T V Narendran.
