British Steel: we are interested in Liepājas metalurgs’ recovery, not asset purchase
The consortium consisting of British Steel, Greybull Capital and Estonian Baltic Metal Holding is interested in KVV Liepājas metalurgs’ recovery, not the purchase of its assets, says Greybull Capital partner Daniel Goldstein.
He refused to go into detail as to why the consortium exited from last year’s KVV Liepājas metalurgs sale process. He did say that ‘now there may be an option to perform the company’s purchase in a constructive way’. This is why the consortium voiced the desire to purchase all of KVV Liepājas metalurgs’ property together earlier this year. «The previous approach was auctioning off assets. We were not interested in such a process. We are interested in creating a business. Business and assets are different things. For a business to form successfully, all interested sides should actively participate. This is what we are hoping for. Assets are important, but they are not decisive. If you have assets, it does not mean you’ll be successful,» said Goldstein.
He admits that there isn’t a clear action plan in relation to Liepājas metalurgs’ already auctioned off assets.
Commenting on the reasons why the consortium did not participate in auctions, Goldstein said British Steel is not interested in separate parts of a business. «An example – there is an old car at the junk yard and you know how to restore cars and want to do it, but you try to bargain for spark plugs. We can only discuss the entire business and involvement of all interested sides in the process, but not interested in buying just the spark plugs. We did try [last summer], but the process in its current shape is not interesting for us. So we left and wished others good luck. Now we’re back at the discussion table,» he said.
According to the Greybull Capital’s partner, because of Liepājas metalurgs’ failures these past ten years, there is a level of skepticism about what kind of magic the British consortium can offer to help out where others failed.
He also mentioned multiple times that the consortium has very serious intentions when it comes to restoration of Liepājas metalurgs’ functionality. «We understand the metalworking industry, we have experience is successfully restoring companies’ functionality. We are here to meet with involved sides and move forward. It is clear this is an election year for Latvia, and everyone is focused on that. We are prepared to work with everyone. I doubt there is anyone who would oppose restoration of this business,» adds Greybull Capital partner.
Goldstein also mentioned that although there are no set terms for talks, the consortium is prepared to wait for tangible progress in this process. «It is said that time kills all deals. The longer it takes for a deal to be signed, the more likely the possibility of it never happening. We are prepared to invest as much time as it is necessary if we sense progress and tangible results. For example, the purchase of British Steel from Tata Steel UK was a very complicated process due to a number of reasons. It took 18 months to complete. Such a long time was needed to coordinate the opinions and desires of all involved sides. We will sense progress. We do not plan to spend 18 months shaking hands and receiving pats on our backs,» says Greybull Capital partner.
Assuming the British consortium manages to reach an agreement with the state on Liepājas metalurgs’ purchase, some impressive investments may be realized in its direction. «We have different business plans in mind. As bare minimum, a new rolling mill should be installed at the plant to work alongside a modern electric furnace and a modern rolling mill to maximize competitiveness. The minimal investment in the formation of a new rolling mill is around EUR 52 million. We are looking into other options to ensure production with the highest possible added value,» adds Goldstein.
The British consortium also has eyes on other assets in the region that would help increase production output. «For example, it could be premises British Steel or other steel-producing companies in Europe could use. Latvia’s geographical location is very good; we can use it strategically. We see very good opportunities here,» said Greybull Capital partner.
He is also confident that there should be problems with supply of raw materials or electricity price until the company is able to function again. «The main source of raw materials is scrap metal. Currently all scrap metals in Baltic States are exported to Turkey. If it is economically beneficial to carry scrap metal to Turkey, it should also be economical to process metals here. Looking at it from this perspective, we believe there will be no shortage of raw materials. We also expect no problems with the price of electricity. These two are very important factors for the plant’s continued function. We expect no problems here,» says Goldstein.