Tata Steel agrees to sell UK speciality steel business to Liberty House

Tata Steel seals deal with Liberty House Group for £100 million even as talks to merge European operations with Germany’s Thyssenkrupp continue


Sanjeev Gupta of Liberty House Group. Tata Steel’s deal includes UK assets and also certain service centres in China. Photo: Bloomberg
Sanjeev Gupta of Liberty House Group. Tata Steel’s deal includes UK assets and also certain service centres in China. Photo: Bloomberg

Mumbai: Tata Steel has signed a definitive agreement to sell its UK specialty steels business to Liberty House Group for £100 million (Rs838 crore), as talks to merge its European steel business with Thyssenkrupp AG continue.

The sale agreement with Liberty House, inked months after the two companies entered into exclusive talks, covers assets across the UK and also certain service centres in China, a statement from Tata Steel Ltd said.

Separately, Thyssenkrupp chief financial officer Guido Kerkhoff said in a conference call on Thursday that the German steelmaker needs to give Tata Steel “necessary time” to prepare for a potential combination of the two companies’ European steel businesses. The deal has been hanging fire over a year after the negotiations became complicated over Tata Steel’s huge pension deficit in UK.

The situation improved a bit in December 2016 after Tata Steel UK started making some progress on an agreement with trade unions to replace its defined benefit pension scheme, British Steel Pension Scheme (BSPS), with a defined contribution plan.

“The sale of the UK specialty assets is another step in the right direction. Another positive is the timeline for resolving the pension discussions within the next few months. That will pave way for a joint venture with Thyssenkrupp,” said an analyst covering Tata Steel, asking not to be named as he is not authorized to speak with the media.

Thursday’s announcement of the sale of Tata Steel’s speciality steels business in the UK, and Thyssenkrupp’s continued interest in a combination of the two companies’ European businesses come after Tata Steel posted its first profit in five quarters, helped by a strong performance by its Indian business, a rebound in demand and higher pricing.

ALSO READ | There may be more to Tata Steel’s bumper profit than meets the eye

Tata Steel invested about £1.5 billion (Rs12,574 crore) in its UK business since acquiring Corus Group Plc for $12.9 billion (Rs86,000 crore at the current exchange rate) in 2007. But its UK business has been hurt by a slump in steel demand and prices, and its European operations have been consistently losing money, prompting the firm to shutter some plants in Europe over the past two years.

Tata Sons Ltd’s ousted chairman Cyrus Mistry had warned that Tata Steel’s European steel business faced potential writedowns of more than $10 billion, only some of which have been booked, according to a 25 October email he sent to the board of the holding company; Tata Steel has denied this.

In March 2016, Tata Steel first said that it plans to sell its UK steel assets, including the Port Talbot steelmaking facility in Wales, that it acquired through its purchase of Corus. The decision aimed at cutting losses on account of a crash of steel prices and competition from cheap imports put 15,000 jobs at risk.

Later, Tata Steel opened talks with Thyssenkrupp for a merger of their European businesses.

In November, Tata Steel signed a a letter of intent with Liberty House, led by India-origin businessman Sanjeev Gupta, to begin talks for the sale of its speciality business.

With the sale of the UK specialty steel business, the focus now returns to the pensions issue.

“Tata Steel UK is currently consulting with its employees on a number of proposals that would structurally reduce risks and help secure a more sustainable future for its wider UK business,” the company said in a statement. It is also in discussions with British Steel Pension Scheme trustee and the pension regulator to develop a structural solution for its UK pension scheme in the coming months.

The deal with Liberty House Group doesn’t include the pan-European strip products supply chain of Tata Steel, which will continue to employ about 9,000 in the UK.

Tata Steel’s shares closed down 2.29% at Rs459.90 on BSE on Thursday. The announcement was made after market hours. The benchmark Sensex rose 0.14%.

Bloomberg contributed to this story.

More From Livemint