The boss of the Port Talbot steelworks is working on a proposal to rescue Tata Steel’s UK business through a management buyout.
Stuart Wilkie, managing director of Tata’s strip products business, which includes Port Talbot, is understood to have outlined his plans to staff and is now trying to raise the funds to launch a bid.
A management buyout could be the best hope of securing the future of the Port Talbot steelworks. Sources close to Tata have warned there is a lack of interest in buying its entire UK business, which is losing £1m a day.
However, a management buyout is fraught with difficulties. Wilkie needs to raise substantial financial backing for his plan, either from private investors or the government.
Wilkie is reported to have asked staff interested in his plans to contribute up to £10,000 towards funding a deal. Sajid Javid, the business secretary, has said the government was willing to co-invest with a potential buyer, meaning it could support a management buyout.
Other potential bidders for Tata Steel UK include Liberty House, Sanjeev Gupta’s metal company; Greybull, the investment firm buying Tata’s steelworks in Scunthorpe; and ThyssenKrupp, the German industrial conglomerate.
Trade unions welcomed the news of Wilkie’s interest but said they were yet to be contacted.
A spokesperson for Community, the steelworkers’ union said: “We welcome interest from all credible potential new owners. We are aware of reports that a management buyout is under consideration and would expect discussions with anyone considering leading such an initiative.
“We are still in the very early stages of the sales process; however it is clear that significant interest in the business exists from a number of different potential buyers. This is a sign that a long–term, profitable future for the industry is entirely possible.”
Around 40,000 jobs are at risk after Tata announced last month that it would pull out of the UK steel industry. This includes 15,000 jobs at Tata and 25,000 in the supply chain.
The management buyout would activate a turnaround plan for Port Talbot, which was presented to Tata’s board last month in a last-ditch attempt to persuade the Indian company to stick with the UK business.
This plan – know as “the bridge” – involves £100m being injected into the business immediately. It would keep the blast furnaces at Port Talbot – a key consideration for the government – and take two years to get the business back into profit.
However, Tata rejected the plan as too risky, and any financial backer for the management buyout would need to support the proposals.
Tata has approached almost 200 parties about potentially bidding for the business. It has declined to reveal the identity of interested parties, as has the government.
The Labour MP Stephen Kinnock, whose Aberavon constituency includes the Port Talbot plant, said he had always felt that management buyout was the right option in principle, but said it needed the right team and financial backing to work in practice.
He said: “That is why the due diligence phase of the sale process will be so important, and why I am very concerned about the tight timeline that Tata Steel has set out. It is vital that Tata Steel delivers on its promise to be a responsible seller and that the government ensures that this is the case.
“There are a number of credible buyers in the market, but sustainable success will only be achieved if the government starts to deliver something tangible on dumping, energy, procurement and business rates. Labour MPs have raised these issues 208 times in parliament since the general election, so there can be no more excuses . It is time for the government to act.”
