Tata Steel in Talks for Possible European Joint Venture -- Update
July 08 2016 - 4:48PM
Dow Jones News
By Alex MacDonald
LONDON -- India's Tata Steel Ltd. is in talks with
steel-industry players, such as Germany's Thyssenkrupp AG, about a
possible joint venture as it goes back to the drawing board for how
to deal with its flagging European business after last month's
Brexit vote, the company said.
In April, the Mumbai-based firm formally said it planned to sell
its ailing U.K. operations, citing a global glut of steel, high
costs and funding strains and was considering a handful of bids for
the British operations.
Late Friday, the company said, amid the uncertainty surrounding
the June 23 referendum by Britons to leave the European Union, it
had decided to look at more sustainable alternative solutions for
the business.
Tata Steel said specifically that it had now entered into
discussions with strategic players in the steel industry, including
engineering conglomerate Thyssenkrupp, to explore the feasibility
of strategic collaborations through a potential joint venture. The
two had been discussing a tie-up for some time.
A potential European deal "offers the best prospects to create a
premium, world-class strip steel business with the scale and scope
of capabilities to compete successfully on the global stage," said
Koushik Chatterjee, Group Executive Director and Tata Steel's
Executive Director for Europe.
This could potentially include a combination of Tata Steel's
plants in Port Talbot, Wales, and Ijmuiden, Netherlands, with some
of ThyssenKrupp's steel operations in Duisburg, Germany, to create
the EU's second largest flat steel producer by production capacity,
with 25% market share. ArcelorMittal is the largest EU flat steel
producer with a 33% market share, according to Jefferies.
While Tata Steel contemplates a potential joint venture of its
European flat-products business, it plans to separately forge ahead
with the sale of its smaller U.K. specialty steel and pipe
businesses.
Located in the English towns of Rotherham, Stocksbridge and
Hartlepool, the smaller operations employ about 2,000 people and
are run largely independently from Tata Steel's much larger U.K.
flat-products business, which employs about 9,000 people and
includes the Port Talbot steel plant, Britain's largest.
The Indian steelmaker said it has already received interest from
several bidders for the specialty steel and pipes businesses and
plans to start a formal sale process soon.
After a Friday meeting with Tata Steel Chairman Cyrus Mistry in
Mumbai, U.K. Business Secretary Sajid Javid said he was encouraged
by the company's intention to pursue a joint venture with
Thyssenkrupp and sell its smaller businesses.
"The government remains committed to doing all it can [to help
Tata Steel find a buyer] and that our package of commercial support
still stands," he said. "We will continue to work closely with Tata
to find a long-term solution for sustainable blast furnace steel
manufacturing in Port Talbot."
The U.K. government offered to provide loans and even purchase
up to a 25% stake in the U.K. business to secure a buyer. It also
said it would help find a solution to Tata Steel's growing U.K.
pensions deficit woes, a key obstacle in closing any deal.
--Razak Musah Baba in London contributed to the story.
Write to Alex MacDonald at alex.macdonald@wsj.com
(END) Dow Jones Newswires
July 08, 2016 16:33 ET (20:33 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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