Tata Steel has agreed the sale of its UK long products business to investment group Greybull Capital for a “nominal” fee in a deal that will revive the British Steel brand and could save 4,400 jobs.
The deal will save a steelworks in Scunthorpe, two mills in Teesside, an engineering workshop in Workington, a design consultancy in York, and associated distribution facilities, as well as a mill in northern France.
Tata has been in talks with Greybull since late 2015 on the sale of its long products business. The agreement does not include the Port Talbot steelworks or the rest of Tata’s UK business, which employs about 15,000 staff, for which it is seeking a buyer after putting it put for sale last month.
The firm will be renamed British Steel, a brand which disappeared in 1999 with the creation of Corus, which was later bought by Tata.
Greybull will only pay a “nominal” fee for Tata’s Long Products Europe (LPE) division because it has agreed to taken on the firm’s liabilities and put together a £400m funding package to keep the business going. A loan from the government on commercial terms could form part of this funding package.
It also said that suppliers and trade unions had agreed to “reset the cost base” of the company, indicating that they will be asked to accept less lucrative contracts.
Trade union officials at Unite said proposals include a one-year pay cut of 3% and changes to their pension scheme, adding that the union has advised members to vote for the package.
The changes to pay and pensions are part of the existing turnaround proposals put in place by Tata before it agreed the sale.
“Greybull believes these vital changes will make British Steel competitive,” the firm said.
“The trade union agreement is subject to a ballot of union members which will take place over the next few weeks,” it added.
The sale follows a lengthy negotiation that began late last year after Tata Steel announced plans to mothball its largely UK-based LPE business, putting around 4,800 jobs at risk, 400 of them in France.
Roy Rickhuss, general secretary of steelworkers’ union Community, offered a cautious welcome for the transaction, despite looming pay cuts for staff.
“Community’s independent experts, Syndex, have assessed that the transformation plan for the business is robust and Greybull has the necessary capabilities to build a sustainable business,” he said.
“The deal alone will be a huge boost to the UK steel industry but more government action to support our industry will be needed to ensure its sustainable long-term future.
“Our members are still voting on temporary changes to terms and conditions that are the result of negotiations in difficult circumstances but, should our members vote to accept the changes, they will represent a significant contribution by the workforce towards turning the business around and giving it the best possible chance of success under new ownership.”
The Unite union added that the government must now take steps to support the business to ensure workers are not left “high and dry” if they accept new working conditions.
“This means supporting steelworkers by ensuring infrastructure such as HS2 and defence projects are built with British steel, as well as tackling the dumping of cheap imports and high energy costs, which is leaving steelworkers fighting with one hand tied behind their backs,” Unite said.
Founded by former Lehman Brothers investment banker Nathaniel Meyohas, Greybull has previously invested in charter airline Monarch and high street electricals retailer Comet.
Greybull’s investment in Monarch also resulted in staff pay cuts to secure the company’s support.
While the private equity firm injected £75m when it bought Monarch, including the UK’s oldest surviving airline brand, crew and pilots were forced to accept a rescue deal that included 30% pay cuts, slashing pilot pensions and 700 redundancies.
The fleet was reduced and the network cut back to most profitable core routes.
Monarch has since returned to profit, making £40m in 2015, vastly aided by tumbling oil prices.
While most airlines hedge their fuel buying, Monarch had been unable to do so and it quickly benefited from the sudden drop in costs.
After just 17 months in charge, Greybull’s owners are reportedly considering a sale of the airline, having appointed Deutsche Bank to explore options, which would land a large profit.
Greybull also provided financial backing for the controversial takeover of Comet, a deal that involved investors pocketing millions of pounds as the chain collapsed into administration.
Nathaniel Meyohas’s brother and Greybull partner, Marc Meyohas said: “We are delighted to have reached agreement for the acquisition of LPE, which we believe can become a strong business, with a highly skilled workforce and great potential.
“I would personally like to thank Tata Steel, the trade unions and the British and French governments for their support, which was essential in ensuring the agreement.
“We are now focused on taking the deal to completion in order that the business can start its next chapter with confidence.”
Bimlendra Jha, executive director of Tata’s long products division, said: “This sale is the best possible outcome for employees who have worked relentlessly to ensure the business’s survival, and helped to make it attractive to a potential buyer.
“This sale is the best possible outcome for employees who have worked relentlessly to ensure the business’s survival, and helped to make it attractive to a potential buyer.”
This article was written by Rob DaviesGwyn Topham, for theguardian.com on Monday 11th April 2016 13.26 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010