Negotiations with UK government provide hope of deal for collapsed group
An investment group owned by Turkey’s military pension fund is in last-minute talks about a takeover of British Steel, offering hopes of a deal that could save thousands of jobs.
Ataer Holding, a wholly owned vehicle of state military retirement scheme Oyak that is also the largest shareholder in Turkish steel group Erdemir, is negotiating with the UK government about acquiring the collapsed steelmaker, according to two people familiar with the matter.
However, one of the people said a push by Ataer for financial undertakings from the UK government had become a point of contention because any taxpayer support could come up against EU rules that restrict state aid for companies. “This is not a done deal,” the person said.
The search for a buyer has been under way since British Steel entered insolvency in May, after pleas from its private equity owner Greybull Capital for a state bailout were rejected.
A rival offer is on the table from Liberty House, the UK industrial conglomerate led by India-born metals magnate Sanjeev Gupta.
The intention had been for the chosen bidder to be named within days, according to people familiar with the situation.
However, the politicised and delicate nature of the sale means the decision is on a knife-edge and the announcement could be pushed back.
A favourable outcome would end more than two months of anguish among workers at British Steel’s vast Scunthorpe plant in Lincolnshire, one of the UK’s two remaining blast furnace steelworks where most of the company’s 5,000 employees are based. British Steel also operates smaller factories in north-east England, France and the Netherlands.
A person close to EY, which is assisting the official receiver in charge of the liquidation, said the terms of the deal were still being negotiated “line by line” on Tuesday during a phone call between representatives of the UK government and the Turkish group.
The complex nature of the proposed deal, which could include the buyer assuming British Steel’s debt and its European manufacturing operations, had led to haggling over some parts of the announcement, the person said.
Ataer owns 49.3 per cent of Erdemir, which stands to benefit from any deal though increased sales opportunities.
The Turkish bid envisages boosting production at Scunthorpe, according to two of the people with knowledge of the situation.
One of them added that senior Erdemir employees had visited Scunthorpe for site tours and that British Steel favoured the bid from the Turkish company, which would implement a cost-reduction plan drawn up by current management in conjunction with consultants McKinsey.
The other said the Turkish bidder’s long-term goal was to build a new furnace and convert the entire plant to use gas over the next decade.
British Steel’s problems began when the delay to Brexit this year led Brussels to suspend the award of carbon credits to UK companies, leaving it in need of a £120m government loan to meet an environmental bill.
The company later said Brexit uncertainty had caused a slump in orders but ministers declined to provide more emergency funding. The main business then entered compulsory liquidation but has continued to trade, with a taxpayer-backed indemnity ensuring bills and wages are paid.
Greybull also wants to regain control of some of British Steel’s assets, but not the main Scunthorpe facilities.
The insolvency service said: “The sales process is continuing and the Official Receiver continues to assess the most viable offers received.”
Source: Source: Financial Times