1. Tata Steel Europe not to be affected by Liberty House 100 mn pound deal, but will go a long way to cut cash burn in long run

Tata Steel Europe not to be affected by Liberty House 100 mn pound deal, but will go a long way to cut cash burn in long run

The deal does not affect overall financials of the company much but reaffirms its plans to look for strategic alternatives for larger operations in the UK and the Netherlands.

By: | Published: November 30, 2016 6:05 AM
Tata Steel, Speciality Steels business, Rotherham Electric Arc Furnace, Tata Steel Europe The deal does not affect overall financials of the company much but reaffirms its plans to look for strategic alternatives for larger operations in the UK and the Netherlands. (Source: PTI)

Tata Steel’s sale of Speciality Steels business in the UK to Liberty House at enterprise value of £100 million pertains to a small operation with the weakest earnings profile among Europe operations. The deal does not affect overall financials of the company much but reaffirms its plans to look for strategic alternatives for larger operations in the UK and the Netherlands. ThyssenKrupp’s senior management, too, spoke on (per media) the ongoing talks for merger with Tata in Europe. The consolidation of European operations will improve asset competitiveness, especially in the premium product segment.

The assets to be sold form a small part of UK operations and includes Rotherham Electric Arc Furnace (0.8 mtpa capacity), remelt facilities and a rolling mill in Stocksbridge, a Strip mill in Brinsworth, Rotherham, and service centres in Bolton, Wednesbury in the UK and in China. The Specialty business employs 1,700. We highlight that the deal excludes Tata Steel’s main operations in the UK—Port Talbot with steelmaking capacity of 4.9 mtpa (strip business).

Speciality Steels is a small operation in the UK and the current deal will not materially change overall financials of Tata Steel Europe. However, it does reaffirm the management’s commitment to finding a sustainable solution for Tata Steel Europe, including potential strategic sale that will help reduce cash burn, especially post the leadership change.

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