Tata Steel inches closer to Europe JV as pen­sion woes set to end

Muscat Daily - - BUSINESS -

Mum­bai,, In­dia - Tata Steel Ltd and the trustee of the Bri­tish Steel Pen­sion Scheme have agreed to terms to separate the plan from the In­dian steel­maker’s UK unit, elim­i­nat­ing the last hur­dle for it to pro­ceed with a strat­egy to place Euro­pean op­er­a­tions into a joint ven­ture (JV).

The Mum­bai-based com­pany has signed the reg­u­lated ap­por­tion­ment ar­range­ment (RAA) with the pen­sion trustee and the terms are ex­pected to take ef­fect in a month’s time, the trustee said in a state­ment on Fri­day. The pact would be ef­fec­tive af­ter Tata Steel pays £550mn and a 33 per cent eq­uity stake in the UK op­er­a­tions to the trustee, the steel­maker said in a separate state­ment.

Over the past year, Tata has sold off some of its un­prof­itable as­sets in the UK as it sought to cut losses amid an in­dus­try slow­down and glut in sup­ply. It started dis­cus­sions with firms in­clud­ing Thyssenkrupp AG for a pos­si­ble joint ven­ture in Europe more than a year ago, even as Tata promised labour unions it would run the com­pany’s Port Tal­bot unit for at least five years. Thyssenkrupp had iden­ti­fied the pen­sion li­a­bil­i­ties as a major stum­bling block to any pos­si­ble deal and is said to have a plan B in place as talks drag on.

The sep­a­ra­tion of the pen­sion scheme from Tata Steel is part of a pro­posal to se­cure the fu­ture of the re­main­ing UK busi­ness as, with­out sep­a­ra­tion, the Bri­tish op­er­a­tions would prob­a­bly be­come in­sol­vent, the trustee said.

“Con­sid­er­ing the con­tin­ued chal­lenges in the global steel in­dus­try, as well as the un­cer­tain global politico-eco­nomic en­vi­ron­ment, the RAA presents the best pos­si­ble struc­tural out­come for the mem­bers of the Bri­tish Steel Pen­sion Scheme and for the Tata Steel UK busi­ness,” Koushik Chat­ter­jee, group ex­ec­u­tive direc­tor, said in the state­ment. “The net fi­nan­cial im­pact of the RAA, in­clud­ing the pay­ment of the agreed amount, would be re­flected in the 2Q FY18 fi­nan­cials for the com­pany.”

Tata Steel has also reached an agree­ment for the spon­sor­ship of a pro­posed new pen­sion plan, the com­pany said. Last week, the com­pany re­ported a surge in profit on ris­ing prices, higher out­put and im­proved per­for­mance at its Euro­pean units.

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