Tata Steel UK on Monday said it has signed a letter of intent with Liberty House Group to enter into exclusive negotiations for the potential sale of its speciality steels business for an enterprise value of £100 million ($124.3 million).
The deal, which will be subject to due diligence and corporate approvals, is part of the parent group’s efforts to offload loss-making assets and restructure its European operations.
The speciality steel business employs around 1,700 people and includes sites in Britain and China and makes steels for the aerospace, automotive and oil and gas industries.
Tata Steel has been trying to restructure its UK business by looking at options like sale and partnerships. The UK business has posted cumulative losses of over R22,000 crore in the last five years. In April it agreed to sell its long-products business in Scunthorpe to investment firm Greybull Capital for £1. In July, Tata Steel said it was in talks with Germany’s ThyssenKrupp over a joint venture for its European operations.
“Tata Steel UK’s losses and funding requirements are at unsustainable levels for the company. Even under adverse market conditions, the company has extended substantial financial support to the UK business and suffered asset impairment of more than £2 billion in the last five years,” ousted chairman Cyrus Mistry had observed in Tata Steel’s FY16 annual report.
“The speciality steels business is independent of the pan-European strip products supply chain and today’s announcement is in line with the overall restructuring strategy of the UK portfolio,” Tata Steel UK CEO Bimlendra Jha said, adding that the company continues to seek solutions to its structural challenges.
In fact, the ongoing spat between Ratan Tata and ousted Mistry has some of its roots over the latter’s handling of the European business. While Ratan Tata was focused on the top line, Mistry was more focused on the bottom line. On Friday, Mistry was replaced as chairman of Tata Steel.
Liberty House Group, led by Indian-origin businessman Sanjeev Gupta, had emerged as the frontrunner for Tata Steel’s UK plants when these were put on the block earlier this year.