Tata Steel reaffirmed plans to revamp its loss-making UK operations and said talks are progressing with Thyssenkrupp for a potential joint venture in Europe after a leadership change at parent Tata Sons.
The Mumbai-based company is looking to sell its South Yorkshire-based specialty steels business and is also “deeply engaged with all relevant stakeholders in the UK to find a structural solution” to legacy pension liabilities, it said in a statement.
The steelmaker is seeking to assuage doubts about whether the company will sustain its push to reduce debt and sell down assets after Tata Sons chairman Cyrus Mistry was abruptly replaced by his predecessor Ratan Tata. Mistry remains chairman of Tata Steel and, in an e-mail this week to the Tata Sons board, had singled out Tata Steel’s European business as among group units he inherited that were saddled with debt. The steel producer has absorbed only a portion of potential impairments that had exceeded $10bn, Mistry said in the e-mail, a copy of which was obtained by Bloomberg.
“Tata Steel has to selloff the UK business for their survival, it doesn’t matter who their leader is,” Chokkalingam G, managing director at Mumbai-based Equinomics Research & Advisory Pvt, said by phone. “It’s a matter of time before Mistry gives up chairmanship of individual companies.”
Tata Steel in March said that it would consider selling its UK business, formerly known as Corus Group. In July, the company entered into talks with Germany’s Thyssenkrupp among others on a possible joint venture in Europe, after reviewing bids for its UK assets.
In 2007, Tata Steel made the largest overseas acquisition ever by an Indian company, paying $12.9bn for Corus, which included the former British Steel. However, a demand slump in Europe after the 2008 economic crisis and a flood of cheaper Chinese imports hurt operations.
The steelmaker has posted three straight quarterly losses through to June on writedowns at its UK operations. The latest impairments were from its discontinued long-product operations in the UK that it sold to Greybull Capital on May 31. Sale of its other UK units have been stalled as buyers don’t want to take on pension liabilities. Tata Steel shares rose 1% to Rs401.30 as of 11:20 am in Mumbai on Friday, ending a five-day slump of 7.3%.