Corus to sell Teesside Cast Products unit

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Mumbai: Tata Steel on Thursday said that its Anglo-Dutch unit Corus had signed a memorandum of understanding (MoU) to sell a majority stake in Corus’ Teesside Cast Products business in the UK. The company, however, did not disclose the financial details of the deal to sell a majority stake in the business to Italian firm Marcegaglia SpA and South Korea's Dongkuk Steel Mill Co Ltd.

Meanwhile, the Financial Times newspaper had earlier reported the deal would be worth about $450 million.

Corus, hit by a down turn in the steel industry, had earlier announced a series of strategic measures that will improve its competitive position. The initiative focuses on three areas: divestments, asset restructuring and a company-wide efficiency and overhead review, the company said. These measures are expected to bring annual improvements in operating profit of more than 200 million euro. It will also put around 3,500 jobs at risk, it said.

Phil Dryden, divisional director of Corus long products said in a statement, “The proposed change of ownership fits the business plans of all participants and will significantly improve prospects for the further long-term development of steelmaking on Teesside.”

Tata Steel shares on Thursday were up 3.65% to close at Rs 183.30 on the BSE.

Tata Steel said that Marcegaglia and Dongkuk would undertake due diligence to finalise the terms of the deal as soon as possible. Tata Steel would retain a minority holding in the Teesside business, while Marcegaglia would hold the largest equity interest, the company informed.

Marcegaglia and Dongkuk are part of a four-member consortium that has a slab offtake agreement with Corus. The other two members, Alvory SA and Duferco Participations Holding Ltd, would continue with a revised agreement after the change in ownership.

Earlier this week, Corus had said that it was in advance stage of negotiations for the sale of the Teesside business.

“We are faced with a situation where demand is almost down 40% compared to last year,” Philippe Varin, chief executive of Corus, said while announcing Tata Steel’s stand alone Q3 results in Mumbai. Tata Steel’s net profit from its Indian operations fell 56.4 % in the third quarter ended December 2008.