Tata Steel to sell part of UK business to Greybull Capital

The Tata group has started disentangling itself from Corus Group Plc., agreeing on 11th April 2016 to sell one of its main steelworks to investment firm Greybull Capital Llp.
•    Under the agreement, which will save about 4,800 jobs, Greybull Capital will pay a nominal £1 for the entire long-products business and take over its assets and liabilities.
•    The deal includes a £400 million investment and financing package for the business, as well as agreements with suppliers and unions on cutting costs.
•    The transaction came at the start of the formal sale process of Tata Steel Ltd’s UK assets, which it acquired in 2007 through the $12.9 billion (around £9.2 billion today) purchase of Corus Group.
•    Tata Steel signaled its intention to divest the business at the end of March, saying it couldn’t sustain the losses it was taking any longer. The company said that it will consider various restructuring options, including a partial or full sale of its UK assets, putting in jeopardy nearly 15,000 jobs.
•    The deal with Greybull will save about a third of those jobs—4,400 in the UK in addition to 400 in France.
•    The sale covers several UK-based assets including Scunthorpe steelworks, two mills in Teeside, an engineering workshop in Workington and a design consultancy in York along with a mill in Hayange, France.
•    In a separate statement, Greybull added that it would take over the associated sales and distribution network as well. Products from this division would now sell under the brand British Steel, Greybull said.
•    The deal is subject to the resolution of conditions including transfer of contracts, government approvals and the completion of financing arrangements, Tata Steel Europe said in a statement. Deal closure may take eight weeks.
•    Greybull is arranging the £400 million investment and financing package for the business from a combination of banks and shareholders to fund working capital and future investments, it said.
•    The existing management team will stay and run the business, implementing the plan that they have drawn up to return the company to profitability. The search for a permanent chief executive officer (CEO) has started and an appointment will be made in due course, Greybull said.
•    Hans Fischer, CEO of Tata Steel’s European operations, said the company was pleased with the deal.
•    Tata Steel Europe has appointed KPMG Llp as advisers for the sale of its UK assets.
•    KPMG and Slaughter and May also advised Tata Steel UK on the successful divestment of the long products division.
•    Greybull is not taking on pension liabilities under the deal with Tata Steel.
•    Tata Steel has been struggling with its European business since the 2007 acquisition, the biggest by an Indian company, amid declining demand for steel and a sharp drop in the price of the alloy as well as competition from cheap Chinese imports.
•    As of 30 September, the consolidated debt of Tata Steel was Rs.71,798.36 crore. The total long-term debt of its Europe business is about €3 billion.
•    The debt related to the long products division of Tata Steel Europe may be between Rs.12,000 crore and Rs.15,000 crore, said Rahul Dholam, an analyst at Angel Broking Pvt. Ltd.