Could Tata change course over sale of Port Talbot?
COULD Tata be considering a huge corporate U-turn by keeping ownership of the Port Talbot steelworks?
It might sound highly improbable as Tata’s share price has been boosted considerably since it confirmed last month it was selling its UK business – although many senior executives and board members wanted to close it with immediate effect.
But it has emerged that the UK Government would consider providing the level of support earmarked for any buyer(s) of the business to Tata.
In a statement the Indian-owned company said, however, that it “remains committed to the sale process.”
So far the UK Government, although without any fine details, has talked of a commercial loan of around £200m to support a new buyer as well as taking a 25% equity stake.
However, it is unclear whether the offer of an equity position would also see additional finance attached, or is just a way of giving confidence to private sector backers behind any new owners.
So far around 65 parties have signed confidentiality agreements giving them access to financial information about Tata’s UK plants.
Tata has agreed in principle to sell its long products division, centred around the Scunthorpe plant, to Greybull Capital.
And a group known as Albion Steel has emerged as a possible buyer of its specialist steel operations in Yorkshire.
In a statement to the FT Sajid Javid’s business department said: “Our offer is open to new buyers, but if Tata changes their minds we will be open to discuss what potential support on commercial terms we might give them.”
On Tuesday Prime Minister David Cameron visited the Port Talbot plant to meet management and union leaders.
However, whether Tata performs an unlikely U-turn or a buyer is found for the Port Talbot operation, which employs 4,000, and the down stream businesses including those at Llanwern, Trostre and Shotton, it will require significant investment.
This could potentially be nearly £400m, including UK Government support, just to get to a break even position.
Longer term, hundreds of millions of pounds in future investment could be required.
According to the FT, Tata had been offered comparable terms to poten- tial buyers.
Quoting a person close to Tata, the paper said that the company was exploring the details of the fine print.
A source said: “There hasn’t been detailed discussions, but I don’t think anyone has ruled it out.”
Asked if they would reconsider the decision to sell if market conditions continue to improve, Tata said in a statement: “We remain committed to the sale process.”
Asked if the UK Government has offered Tata Steel financial support to keep the Port Talbot steelworks open, the company added: “We remain committed to the sale process. As yesterday’s visit by the Prime Minister to the Port Talbot steelworks demonstrates, we remain in close dialogue.”
Many believe, including Roger Maggs, chairman of Excalibur Steel UK which is working on a formal bid for the entire business through an employee management buyout, that there is no way that Port Talbot is losing £1m a day.
Liberty Steel, which has steel and power station interests in Newport, has also announced an interest in acquiring the business. LONDON’S top-flight index was given a shot in the arm from drugs giant GlaxoSmithKline yesterday after it drove home a better-than-expected jump in profits and sales.
The FTSE-100 Index was 35.4 points higher at 6319.9, as Britain’s biggest drugs company booked a 19% rise in core operating profit to £1.56 billion for the first quarter, as sales also stepped up 11% to £6.23 billion.
The uplift was underpinned by a strong performance from new product sales, rising 20% quarter on quarter to £821 million, driven in part by HIV drugs Tivicay and Triumeq.
However, it was mixed day on the market for banking stocks, as Barclays made marginal gains despite profits tumbling, while Lloyds Banking Group and HSBC saw their share prices fall.
Commodity stocks were given a lift as Brent crude temporarily hit a high for 2016 at 46.77 US dollars a barrel amid reports by the American Petroleum Institute that US stock piles of crude had declined.
Oil major Royal Dutch Shell lifted 47p to 1816p despite the price of oil slipping in later trading to 46.15 US dollars a barrel.
The pound was down 0.2% against the dollar at 1.455, as the UK economy slowed in the first quarter of this year following a slump in the manufacturing and construction industries.
The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.4% in the first three months of 2016, down from 0.6% in the fourth quarter of last year.
Sterling also fell 0.4% against the euro at 1.285.
In stocks, GlaxoSmithKline climbed 30p to 1488.5p as total pharmaceutical sales rose 5% to £3.59 billion in the first quarter, while vaccines climbed 14% to £882 million and consumer healthcare picked up 4% to £1.76 billion.
Barclays was up 0.9p to 174.8p as it posted first quarter pre-tax profits of £793 million, down from £1.1 billion a year earlier as underlying profits in its corporate and investment banking business dropped 31%. Other banks saw contrasting fortunes. Lloyds, which reports its figures tomorrow, sunk 0.8p to 69.3p, while HSBC was down 2.8p to 466.6p.
The biggest risers in the FTSE 100 Index were Anglo American, up 29.7p to 696.9p, WorldPay, up 11.1p to 169.4p, IAG, up 19.5p to 555p, easyJet, up 52p to 1513p.
The biggest fallers were Tesco, down 8.7p to 174.8p, Prudential, down 24.5p to 1385p, and Legal and General down 3p to 237.7p.