Tata Steel’s UK sale plan hits Brexit speed bump
British trade secy Sajid Javid holds talks with Mistry, govt
Tata Steel will study the impact of Brexit on its plan to sell its UK business, signalling a slowing down of the sale process that was on the verge of fruition. The company had shortlisted seven bidders and got a commitment from the British government to buy a portion of Tata Steel UK’s equity, sources said.
Prior to a board meeting in Mumbai on Friday, Tata Group chairman Cyrus Mistry met UK business secretary Sajid Javid to discuss the future of Tata Steel’s UK business. The company, which has been trying to sell its UK business, could likely see an impact on the sale process after a UK referendum on June 23 voted on Britain leaving the European Union.
“Just finished meeting with Tata Steel in Mumbai. Now off to Delhi for talks on UK/India trade,” Javid said in a tweet.
The vote to leave the EU could likely invite trade restrictions on Britain and on businesses based there. Since most of Tata Steel UK’s business caters to the whole of Europe from Britain, it is likely to change the valuations of Tata Steel UK, a concern that has also impacted Tata Steel’s stock in the last few days.
A Tata Steel spokesperson did not comment on the agenda of Friday’s board meet, but sources close to the management said the sale of the UK business has been a priority item at all recent management meetings.
However, speaking to HT on the sale process of the UK business, Ishaat Hussain, a director on board Tata Steel said: “It’s a long process and a lengthy process. It will take time. It’s not a binary process. You look at the current global business situation. It does have an impact on all business decisions. The (sale) process is on. We are exploring
TATA STEEL’S UK BIZ WAS INITIALLY LOSING £ 1 MILLION A DAY, BUT A RECOVERY IN STEEL PRICES AND THE POUND’S GLOBAL FALL HAVE MADE THE BUSINESS MORE VIABLE
all possibilities.”
Tata announced plans to sell its UK steel operation in late March, putting 11,000 jobs at risk, including 4,000 at the strip products business in Port Talbot, south Wales. It blamed cheap Chinese imports, the depressed price of steel and high energy costs for the decision to sell the business it bought in 2007. The company’s board has also been considering the impact of a large pension deficit that the company inherited when it acquired the erstwhile Corus in 2007, which subsequently became Tata Steel UK. The $900-million deficit on the pension fund has been a major factor in slowing down the sale process, and its impact on the future of jobs had prompted the UK government to consider relaxing pension norms.
The UK government has also expressed its intention to acquire 25% stake in Tata Steel UK, as a bid to support the company and save around 4,000 jobs.
The Tata Steel board includes prominent independent directors, such as, Subodh Bhargava, chairman emeritus of the Eicher Group, OP Bhatt, former chairman of State Bank of India, Mallika Srinivasan, chairperson of Tafe and Nusli Wadia, chairman of Bombay Dyeing.
On Thursday, BBC News reported that Tata Steel is expected to put on hold the sale of most of its UK business, including the Port Talbot facility in Wales. According to the BBC News report, “after an initial sense of urgency to offload the loss-making business, Tata has recently adopted a more relaxed approach to determining its future, as government incentives to keep the business going have come in thick and fast”.
Javid’s talks with company executives and policymakers are part of Britain opening preliminary talks on trade agreements in the post-Brexit vote scenario with India, the US, China, Japan and South Korea.
Indo-UK bilateral trade stood at around ₹1.5 lakh crore last year. The UK is the third-largest investor in India, with cumulative inflows of $22.5 billion during April 2000 to September 2015.
“Following the referendum result, my absolute priority is making sure the UK has the tools it needs to continue to compete on the global stage. That is why I am in India to launch these initial trade discussions. There is a strong bilateral trade relationship between the two countries and I am determined that we build on this,” Javid had said before flying down to India.