There is good news for thousands of British steel workers. Three parties have shown interest in buying Tata Steel's historic Scunthorpe steel plant and several smaller sites across the country.
Several funds that specialise in trying to rescue troubled companies are battling it out to buy Tata’s so-called long products arm, of which the giant 150-year-old Scunthorpe plant in Lincolnshire is at the heart.
Britain’s steel crisis intensified last month after Tata Steel’s European boss warned that the Scunthorpe plant had “no future” in its empire. However, it is understood that the Indian steel maker could agree a deal as early as next week after receiving formal bids from three parties.
Leading the pack are two of Britain’s biggest turnaround investors: Greybull, the financiers who made their name last year after swooping to the rescue of Monarch, the struggling airline; and Endless, best known for reviving the fortunes of Crown Paints. A third bid has come from a mystery American private-equity house.
Gary Klesch, the US billionaire, has also shown strong interest but is thought to have walked away from talks during the summer, blaming the Government’s failure to address rising energy prices and cheap imports from China. Discussions have centred on the sale of Tata’s long-products division, where the Indian steelmaker recently announced 1,200 job losses as part of a restructuring. The business, which will have around 5,000 staff after the redundancies, produces parts that are used in construction and heavy industry.
It has struggled to compete in the global steel market, where prices are depressed by China’s state-backed steel mills dumping overcapacity, and has long been considered non-core to Tata’s sprawling global empire. It is estimated that hundreds of millions of pounds will be needed to revive the business.
Interest has also been received in Tata’s entire UK operations, including its Port Talbot site, but sources close to Tata insist that its preferred outcome is to offload only the long-products arm. If the Indians fail to find a buyer, industry sources believe they will be forced to close the operations and sell assets piecemeal. It is understood Tata has also asked the Government for support to enable it to keep the business going. However, state aid is thought to be unlikely as the Government refused to bail out SSI’s Redcar steel plant.
Tata’s British plants are hampered by high labour and power costs. Energy prices in the UK are some of the highest in Europe, and are pushed up by green levies. The Indian company’s time at the heart of the UK steel industry has not been a happy one. Tata, which also owns UK carmaker Jaguar Land Rover, bought the Anglo-Dutch steelmaker Corus in 2007 for £6.2bn, just before the financial crisis hit, renaming the company Tata Steel Europe.
