Tata Steel has put up for sale its loss-making business in Britain, putting thousands of jobs at risk and potentially forcing the David Cameron government to seek a solution ahead of an EU referendum dominated by concerns about the economy.
Europe’s second-largest steelmaker that employs 19,000 people across 14 sites in Britain made the announcement at 4.30 am after a marathon board meeting in Mumbai on Tuesday night.
Workers’ unions welcomed the decision not to shutter the plants but called on Tata to be a “responsible seller”. The UK government could buy the business until a new owner was found, a minister indicated.
“Following the strategic view taken by Tata Steel board regarding the UK business, it has advised the board of its European holding company, Tata Steel Europe, to explore all options for portfolio restructuring including the potential divestment of Tata Steel UK, in whole or in parts,” the company said in the statement.
Senior Tata Steel official Koushik Chatterjee told newsmen on Wednesday the board spent “almost 7 hours reviewing the European business” before arriving at the decision.
Tata Steel kicked off its UK business nine years ago after acquiring the Anglo Dutch Corus Group in a $12 billion deal that remains the biggest by an Indian company.
It also marked a high point in a spree of overseas acquisitions by Indian companies before the 2008 financial crisis.
In 2007, then Tata Group chairman Ratan Tata called the Corus deal a “very visionary move... Hopefully in future, people will look back and say that we did the right thing.”
The company went on to acquire Jaguar Land Rover, which remains a highly profitable business.
Asked if the company regretted the decision, Chatterjee called it an “unfair question” and added it was a “logical derisking… and that no company predicted the global financial crisis which led to reduction in structural demand in Europe by 30%.”
Most steel companies including top producer ArcelorMittal –owned by Indian-born LN Mittal – have been hit by plunging prices due to overcapacity in China, the world’s biggest steel market, making Tata’s task of finding a buyer all the more difficult.
The entire UK business up for sale has a capacity of close to 7 million tonne while Tata Steel’s Europe capacity is 13.5 million tonne.
The company’s stock rose by seven per cent on the Bombay Stock Exchange after the announcement.
The Tata move could have an impact on Britain’s closely fought June 23 vote over whether to stay in the European Union. Britain’s anti-EU media have blamed Brussels for preventing London from taking greater steps to protect the industry.
“We are, and have, and continue to look at all options, and I mean all options. But what we first want to achieve from Tata is this period of time to allow a proper sale process,” Anna Soubry, UK’s minister for business, told BBC radio.
She said she could not rule out the possibility of the government buying the plants until a new owner could be found.
Some workers’ unions criticised the government for not sending a minister to India to lobby for the plants to be kept open.
“Tata has let the whole of the UK steel industry down,” said Dave Hulse, national officer of the GMB union.
(With agency inputs)