BackTata Steel reaches out to 190 investors for UK asset sale
Tata Steel also announces the appointment of Standard Chartered Bank as additional adviser to the process
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Tata Steel Ltd has reached out to 190 potential investors for its UK assets, the company said in a statement to stock exchanges on Monday.
On 11 April, Tata Steel Europe initiated the sale process for its UK assets and appointed KPMG Llp as an adviser for the divestment of its entire shareholding in its subsidiary Tata Steel UK.
“Over the last seven days, the advisers for Tata Steel Europe have begun initial exploration of interest in Tata Steel’s UK operations, reaching out to 190 potential financial and industrial investors worldwide," the company said in its statement.
On Monday, Tata Steel also announced the appointment of Standard Chartered Bank as additional adviser to the process, “to ensure the coverage and reach of the universe of potential buyers, especially to Asia and Far East", the company said. Standard Chartered will work with KPMG on the sale process.
Tata Steel has also appointed Bimlendra Jha as chief executive of Tata Steel UK. Jha is an executive committee member of Tata Steel Europe and currently executive chairman of its long products business. Jha will report to Tata Steel Europe chief executive officer Hans Fischer.
On 31 March, Tata Steel directed its subsidiary Tata Steel Europe to consider various restructuring options for its UK steel assets, including a sale in parts or whole. On 11 April, Tata Steel announced the sale of its long products division to Greybull Capital for a nominal amount and on a debt-free basis. Analysts expect the sale of the remaining UK assets to attract a similar valuation. As of September 2015, Tata Steel had consolidated debt of ₹ 71,798 crore—most of it associated with the global operations. The stand-alone debt of Tata Steel India was at ₹ 25,332 crore.
Commodity tycoon Sanjeev Gupta-led Liberty House has been one of the early investors to express interest in these assets, but is unwilling to take on the liabilities related to these assets.
Tata Steel has been moving fast on its planned exit from UK steel assets. “More detailed information sharing will commence this week as the process moves into the confidential phase," the company said in its Monday statement.
Koushik Chatterjee, group executive director, finance and corporate, Tata Steel, in a email to Mint queries on 3 April said, “It is not a valuation exercise for Tata Steel. There is severe cash burn in our UK Operations; hence, it is imperative to close the review on priority."
For the December 2015 quarter, the firm reported an earnings before interest, tax, depreciation and amortization loss of ₹ 675 crore for its Europe business. Tata Steel has taken impairments of £2 billion in the past five years on its UK assets.
“Reaching out to 190 investors indicates the desperateness and also the poor health of the units (UK steel units)," said an analyst with a domestic brokerage firm, declining to be identified.
Harish H.V., partner at Grant Thornton India Llp, said it shows the firm is trying to do everything possible. “If it was a private deal and people do not know that they are negotiating, it makes sense to approach fewer people. Since it is a publicly announced deal, it makes sense to reach out. Distress sales are generally done like this," he said.
Tata Steel had acquired Corus Plc in 2007 for $12.9 billion. The acquisition, however, soon ran into trouble as steel demand in Europe took a hit during the global financial crisis. In recent years, Tata Steel UK assets further suffered due to rising cheaper imports, high energy costs and muted steel demand.
On Monday, Tata Steel closed at ₹ 335 per share on BSE, up 0.72% from its previous close, while the benchmark Sensex rose 0.74%.
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