Tata Steel has agreed to sell its speciality steels business in northern England for £100m to Liberty House, the metals company run by tycoon Sanjeev Gupta, ending months of uncertainty for 1,700 workers.
The Indian-owned company put the business up for sale earlier this year after reviewing its struggling UK operations, which also include Britain’s largest steelworks in Port Talbot, south Wales.
Tata Steel has signed a letter of intent with Liberty about the deal, which means both parties now enter exclusive negotiations and can work on finalising terms.
The deal was welcomed by trade unions and MPs, who said the announcement secured the future of the business’s workers and key sites.
However, the future of the rest of Tata Steel UK, which employs 11,000 people, remains unclear. Tata Steel is understood to be keen to keep the rest of the UK business, including the strip products arm based in Port Talbot, and is in talks with German company ThyssenKrupp about merging their European steel operations. However, it needs to agree with the UK government, the Pensions Regulator, and pension trustees about the future of the British Steel pension scheme, which has liabilities of £15bn.
Liberty has bought a string of struggling steel sites across the UK - including two Lanarkshire steel mills from Tata Steel – and also expressed an interest in buying the Port Talbot steelworks.
The speciality steels business employs 1,700 people and produces materials for the aerospace, automotive and oil and gas industries. It is under investigation by the Serious Fraud Office over forgery allegations, which led to the managing director of the business being suspended. Its primary sites are in Rotherham, Bolton and Stocksbridge near Sheffield.
Bimlendra Jha, chief executive of Tata Steel UK, said: “This is an important step forward in seeking a future for speciality steels and we have reached this stage thanks to the efforts of employees, trade unions and management.
“We continue to actively seek solutions to the company’s structural challenges and work with all stakeholders. Among those challenges, there is the need to develop a more sustainable business in the UK as well as a self-sustaining future for the British Steel pension scheme.”
Jha defended Tata Steel’s management of its UK business, saying it had invested £1.5bn over the last nine years and was investing £85m this year into ensuring its facilities can produce premium steels, which is a growing market.
Roy Rickhuss, general secretary of steel union Community, welcomed the announcement. There had been speculation in recent days that Tata Steel could scrap the sale process and keep the business.
“After months of uncertainty and delay from Tata, this will be welcome news for the thousands of steelworkers whose jobs depend on the success of this business,” Rickhuss said. “Community has worked with Liberty House Group at steel sites across the UK, and I have already spoken with the company about the next steps in this process.
“The number one priority for Community will be ensuring that Liberty has a proper plan to protect jobs and provide the long-term investment necessary to grow the business. Crucial to this plan will be ensuring that the business’s loyal workforce have a pension plan that provides dignity and security in retirement.”
Gill Furniss, Labour’s shadow steel minister, said: “After months of worry, steelworkers and their families in South Yorkshire at last have some certainty over what the future holds.
“There are still huge challenges facing the steel industry nationally and we shouldn’t be complacent. On energy prices, on business rates, on procurement; the government has made all the right noises about saving steel. Now is the time to act.”
Gupta, the executive chairman of Liberty, pledged to work with trade unions on the future of the speciality steels business.
He said: “We look forward to working with Tata Steel over the coming weeks to complete this hugely important milestone transaction. We recognise the world-class skills of the speciality steels workforce and are eager to join with them to develop the business and increase market share, both domestically and internationally using our global presence.”
The deal is subject to due diligence and clearance from competition authorities. The agreement will not be completed until the first quarter of next year at the earliest.
