Tata Steel has announced the signing of an agreement to sell its long products business in the UK to Greybull Capital. According to the press release, the sale is for a nominal consideration, with the buyer taking over the whole long products business, including assets and relevant liabilities. The assets include the key steel plant in Scunthorpe, UK (4.5 million tonne capacity), mills at Teesside, mill in France, engineering workshop in Washington, design consultancy in York and associated distribution facilities.
According to the release, Tata Steel will continue to carry the related debt and pension liabilities. The unfunded pension liability towards the total UK operations (includes the Scunthorpe and Port Talbot plant) amounts to £90 million, based on the last triennial valuation exercise in March 2014. The deal will be completed after the outstanding conditions are resolved. In our view, the deal execution/closurecould take 2.5 months.
According to the FY15 annual report, the company’s European operations reported EBITDA of £290 million, including profit of £460 million in the Netherlands and loss of £170 million in UK (includes Scunthorpe and Port Talbot). For European operations, we currently estimate EBITDA loss of £92 million in F16, which includes a pro forma loss (by our estimate) of £350-380 million in UK.