Tata Steel Europe

Tata Steel Europe Ltd.
Formerly called
 Corus (1999–2010)
Subsidiary
(Private limited company)
Industry Steel industry
Predecessor Corus Group plc (1999)
Headquarters London, United Kingdom
Key people
 Hans Fischer, CEO
Bimlendra Jha CEO (Tata Steel UK)
Henrik Adam, CCO
Tor Farquhar, Executive Director Human Resources
N.K Misra, Director Finance
Revenue US$11.2 billion (2016)
US$-127 million (2016)
Owner Tata Group
Number of employees
 21,000
Parent Tata Steel
Website tatasteeleurope.com

Tata Steel Europe Ltd. (formerly Corus Group plc) is a steelmaking company headquartered in London, United Kingdom, with its main operations in the United Kingdom and the Netherlands.

Corus Group was formed through the merger of Koninklijke Hoogovens and British Steel plc in 1999 and was a constituent of the FTSE 100 Index. It was acquired by Tata of India in 2007, and renamed Tata Steel Europe in September 2010.

At formation Corus operated primary steelmaking plants (blast furnace) in Port Talbot, Wales, and Scunthorpe, and Teesside, England, and IJmuiden, the Netherlands, with additional steelmaking facilities in Rotherham, England (electric arc furnace), as well as downstream steel production of both long and flat steel.

Profitability at the business was affected by the aftermath of the Financial crisis of 2007–08 (see Great Recession): the Teesside plant was mothballed and sold in 2009/2010; the long products division including the steelworks at Scunthorpe was sold for a nominal sum to Greybull Capital in April 2016.

History

Background – Corus

British Steel Corp. was a large British steel producer, consisting of the assets of former private companies which had been nationalised on 28 July 1967 by the Labour Party government of Harold Wilson. On 5 December 1988 the company was privatised as a result of the British Steel Act 1988. Koninklijke Hoogovens was a Dutch steel producer founded in 1918, located in IJmuiden.

In October 1999, British Steel merged with Koninklijke Hoogovens to form Corus Group. At formation the steel company was the largest in Europe and the third largest worldwide.[1] The French steel company Sogerail, specialised in rail manufacture was acquired in 1999 shortly before the merger by BSC for £83 million.[2]

In 2001 Corus announced it was to cut 6,050 jobs between 2001 and 2003.[3]

In 2003 Corus became the sole owner of SEGAL, a galvanizing company established 1983 as a joint venture.[4]

In March 2006, Corus announced that it had agreed to sell its aluminium rolled products and extrusions businesses to Aleris International, Inc. for €728million (£572 million). Corus was to retain its smelting operations and supply Aleris under a long-term agreement. On 1 August, the sale to Aleris Europe was completed.[5][6] The sale took place in May 2006.[7]

In 2006 the Mannstaedt works (Troisdorf, Germany, special profiles, acquired by BSC in 1990) was sold to Georgsmarienhütte (GMH Holding).[8][9]

Takeover by Tata Steel

On 20 October 2006, Corus announced that it had accepted at £4.3 billion ($8.1 billion) offer from Tata Steel; a valuation of £4.55 per share. The combination of Corus (18.18MT pa) and Tata (4.4MT pa) would create the fifth largest steelmaking company worldwide.[10] Tata surprised the credit default swap segment of the derivative markets by deciding to raise $6.17 billion of debt for the deal through a new subsidiary of Corus called 'Tata Steel UK', rather than by raising the debt itself. Tata's security credit rating was investment grade, whereas the new subsidiary may not be. The higher risk associated with raising debt through a subsidiary with a lower credit rating prompted Fitch Ratings to downgrade its rating of the credit swap risks in the takeover to 'negative'. Fitch also stated that Corus' responsibility for the debt may lead to Corus' own unsecured debt rating being downgraded. This does not affect the rating of bonds issued by Corus which are secured debt.[11]

On 19 November 2006, the Brazilian steel company Companhia Siderúrgica Nacional (CSN) launched a counter offer for Corus at a higher valuation of £4.75 per share.[12] CSN and Corus had previously discussed a merger in 2002,[13] cancelled late 2002;[14][15] CSN's iron ore assets would provide synergy with Corus's need to import ore.[12]

Subsequently Tata submitted an improved bid at £5.00 per share, followed by an improved bid from CSN at £5.15 per share which was accepted by the board of Corus on 11 December 2007. On 19 December 2006 the UK body, the Panel on Takeovers and Mergers announced a close date for bidding of 30 January 2007.[16]

On 30/31 January an auction was held by the Panel for Corus's shares, with Tata outbidding CSN at £6.08 vs £6.03 per share. CSN's bid had been supported by Goldman Sachs whilst Tata's was supported by ABN Amro, Rothschilds, and Deutsche Bank.[17][18]

2007 – 2014

In January 2009, Corus announced job cuts of 1,000 in the Netherlands and 2,500 in the UK due the economic downturn (see Great Recession) and consequent reduction of steel demand. Cuts included cessation (mothballing) of production at a hot strip mill in Llanwern, Wales (600 jobs), as well as major jobs losses (up to 700) at the engineering steel production site in Rotherham. Corus also closed down its defined benefit pension scheme to new members.[19]

In late 2009 Corus announced the mothballing of the Teesside Cast Products plant (Teesside blast furnaces), following the unexpected cancellation of 10 year contracts with Marcegaglia (Italy) signed 2004. Corus's workforce was expected to be reduced by approximately 1,700 as a result;[20] The plant had been identified as surplus to requirements in 2003, with Corus's own steel requirements to be supplied from Port Talbot and Scunthorpe, with Teesside Cast Products to seek external markets for its steel slab.[21][22] Partial mothballing took place in early 2010. In mid 2010 the company reached prelimary agreement to sell the plant to Thai steel producer SSI. The plant was sold in February 2011 for £300 million.[21]

In September 2010, Corus announced that it was changing its name to Tata Steel Europe and adopting the Tata logo.[23]

In July 2012, Tata Steel were fined £500,000 over the 2006 death of worker Kevin Downey at their Port Talbot plant.[24] Engulfed in steam and left disorientated during a night shift, Downey died after wandering into a channel of molten slag heated to 1500 °C.[24]

On 23 November 2012 Tata Steel Europe announced that, as a result of restructuring proposals, there would be a net loss of 900 jobs in the UK.[25]

Sale of UK operations (2014 – present)

By late 2014 Tata Group remained £13 billion in debt, which had increased following the acquisition of Corus in 2007, due to reduced demand in Europe (see Financial crisis of 2007–08 and Great Recession). As a result, the company sought to reduce liabilities: the European long products division was offered in sale to Klesch Group.[26] The long products division employed c. 6,500, and was operating at about 60% of its 5 million ton pa capacity; the division included primary production at Scunthorpe steelworks; mills in Teesside (Teesside beam mill, Skinningrove and Darlington special profiles); France (Hayange rail mill); Scotland (Dalzell and Clydebridge), and other assets including the Immingham Bulk Terminal.[27] In late 2014 estimates for the value of the property were c. $1.4 billion.[28] In August 2015 talks on the acquisition ended unsuccessfully, with Klesch citing energy prices and (dumping of) Chinese steel imports as factors against the sale.[29][30]

In October 2015 the Dalzell and Clydebridge plants were announced to be mothballed,[31] The mothballing in Scotland and further reductions at Scunthorpe (c. 900 jobs) led to 1,200 redundancies in late 2015.[32] In late 2015 Tata Steel UK reached a prelimary agreement with Greybull Capital for it to acquire Tata's European long products division,[33] excluding the Dalzell and Clydebridge plants.[34]

In early 2016 CEO Karl Koehler stood down to be replaced by CTO Hans Fischer.[35]

In March 2016 The Sunday Post report that a preliminary agreement had been reached between Tata and Liberty House Group on the sale of the Dalzell and Clydesbridge plants.[36]

At the end of March 2016 the Tata board rejected a turnaround plan for the Port Talbot site, and announced it would seek to sell all (or part) of its UK steel business.[37][38] Its UK steel operations had lost £68 million in the three months to February 2016, from a profit the previous year despite rising demand – a primary factor in the loss was lowered steel prices due to global imports, with Russia, South Korea and particularly China cited as dumping steel.[39] Other factors mitigating against profitability included high energy costs (including green taxes), high business rates and oversupply/low demand.[38][40][41][42] In addition the UK government had voted against increased tariffs on imported Chinese steel due to its free trade policies, limiting import duties to minimal amounts (around 10%).[43][44][45][46] – the Daily Telegraph reported that the UK Government's failure to back EU attempts to increase anti-dumping measure on imported steel had been the tipping point in Tata's decision to exit the UK steel business.[44]

The sale of the Long Products division to Greybull Capital for a nominal £1 was agreed on 11 April 2016, with Greybull taking over assets and liabilities of the division. On completion of the sale Greybull was to rename the business British Steel. At takeover the division employed approximately 5,000 persons, predominately in the UK.[47] The sale was completed end of May 2016.[48]

Tata set a deadline of 28 May 2016 for bids for its remaining UK business.[49] Liberty House confirmed it was to bid for Tata's remaining UK assets,[50] and a management backed buyout, named Excalibur UK also submitted a bid.[51] In early May 2016 Tata stated it was considering offers from seven bidders for the whole UK business,[52] taking forward only bids for the whole of the business.[53] Other bidders were rumoured to be JSW Steel (India), Nucor (USA), Hebei Iron & Steel Group (China), ThyssenKrupp (Germany), private equity fund Endless LLP (UK), and Greybull Capital.[53][54][55][56] Wilbur Ross (USA) was also rumoured to be a late bidder for the assets.[57]

In early July 2016 Tata paused the sale procedure in part to assess the effect of the vote to leave the EU (Brexit) in the UK EU membership referendum of 2016;[58][59] on 8 July it announced it was in discussion with other steelmakers, specifically ThyssenKrupp on the formation of a joint venture between their respective European steel businesses.[60] JSW Steel and Hebei Iron & Steel were also reported as potential joint venture partners.[61] In addition to the talks on a joint venture the company was also stated to be in talks to sell the pipe (Hartlepool) and EAF/specialty steel (South Yorkshire) businesses separately.[59]

In November 2016 Tata and Liberty House signed a letter of intent on the sale of Tata's speciality steel business (Rotherham, Stocksbridge, Brinsworth) for £100 million.[62][63]

In December 2016 Tata made commitments to: invest £1 billion over ten years into its British operations, and continue operating two blast furnaces at Port Talbot for at least 5 years; as well as promising to avoid compulsory redundancies in the next five years; at the same time an agreement was announced between unions and Tata leading to the closure of a defined benefit pension scheme.[64][65]

Operations

Blast Furnace 5 at the Port Talbot Steelworks

At the beginning of 2016 Tata Steel Europe had three blast furnace based steelmaking facilities;[66] the long products division was sold in April 2016 including the Scunthorpe blast furnaces.[47]

It also has rolling mills and steel product manufacturing sites situated at:[66]

Flat products
Tube
Other

Former operations

Scunthorpe Steelworks

See also

References

  1. ↑ "History of Britain's steel industry", The Guardian, 1 February 2001
  2. ↑ "APPENDIX 3  : Memorandum submitted by Corus Rail", www.publications.parliament.uk, Select Committee on Trade and Industry, 24 November 2000
  3. ↑ "Anger after 6,000 steel jobs axed", The Guardian, 1 February 2001
  4. ↑ "Segal", www.segal.be (in French)
  5. ↑ "Corus of approval for Aluminium sale", The Scotsman, 17 March 2006
  6. ↑ "Corus verkoopt aluminiumtak aan Aleris voor EUR 728 mln", www.standaard.be (in Dutch), 16 March 2006
  7. ↑ "Corus verkoopt aluminium-onderdeel aan Aleris", www.trouw.nl (in Dutch), 23 May 2006
  8. ↑ "Mannstaedt GmbH. – Company", www.mannstaedt.de, retrieved 19 April 2016
  9. ↑ "Sections maker Mannstaedt adds processing lines", www.steelbb.com, 9 October 2006
  10. ↑ "Corus accepts £4.3bn Tata offer", BBC News, 20 October 2006
  11. ↑ Ryan, Jennifer (25 October 2006). "Tata Debt for Corus Leaves Derivative Trades in Lurch". Bloomberg. Archived from the original on 25 May 2010.
  12. 1 2 Morgan, Oliver (19 November 2006), "CSN tries to outbid Tata for Corus", The Guardian
  13. ↑ Ascarelli, Silvia; Karp, Jonathan (18 July 2002), "Corus to Acquire CSN of Brazil In Deal Valued at $2.07 Billion", www.wsj.com
  14. ↑ "Corus and CSN break off merger talks", www.gtreview.com, 26 November 2002
  15. ↑ Harrison, Michael (14 November 2002), "Corus shares dive as £2.7bn offer for CSN is abandoned", The Independent
  16. ↑ "Watchdog sets Corus bid deadline", BBC News, 19 December 2006
  17. ↑ Harrison, Michael (31 January 2007), "Tata buys steel giant Corus for £6.2bn", The Independent
  18. ↑ "India's Tata wins race for Corus". BBC. 31 January 2007.
  19. ↑ Wearden, Graeme; Milner, Mark (26 January 2009), "Corus cuts 2,500 UK jobs", The Guardian
  20. ↑ "1,700 jobs to go as Corus mothballs plant", BBC News, 4 December 2009
  21. 1 2 "Timeline: The history of steel on Teesside and in Britain", ITV News, 28 September 2015
  22. ↑ Teesside Cast Products – Myths and Facts, Tata Steel, 6 March 2010
  23. ↑ "VOTE: Scunthorpe steel company will change site name from Corus to Tata Steel", Scunthorpe Telegraph, 28 September 2010
  24. 1 2 "Tata Steel fined £500,000 over death of worker Kevin Downey". Wales Online. 31 July 2012.
  25. ↑ Simpson, Rob (23 November 2012). "Tata Steel restructures to improve competitiveness of UK operations through market cycles". www.tatasteeleurope.com.
  26. ↑ Shanker, Abhishek; Singh, Rajesh Kumar (27 October 2014), Tata Steel Starts Debt Clean-Up After Corus Purchase Mess
  27. ↑ Klesch signs MoU with a view to purchase Tata Steel’s Long Products Europe business (PDF), Klesch Group, 15 October 2014
  28. ↑ MacDonald, Alex (15 October 2014), "Tata Steel in Talks to Sell European Business to Klesch Group", www.wsj.com
  29. ↑ "Klesch abandons Tata Steel's Long Products talks", BBC News, 4 August 2015
  30. ↑ Hollinger, Peggy (3 August 2015), "Industrialist walks away from buying Tata’s Scunthorpe steel plant", ft.com
  31. ↑ "270 jobs go as Tata Steel closes two plants in Scotland", BBC News Scotland, 20 October 2015
  32. ↑ Farrell, Sean; Brooks, Libby; West, Karl (20 October 2015), "Tata Steel confirms 1,200 job losses as industry crisis deepens", The Guardian
  33. ↑ "Tata Steel in talks to sell Scunthorpe and Teesside plants", BBC News, 22 December 2015
  34. ↑ "Uncertainty over deal for Tata Steel's Scots plants", BBC News Scotland, 22 December 2015
  35. ↑ Thomas, Nathalie (5 February 2016), "Tata Steel Europe chief steps down after job cuts", ft.com
  36. ↑ Picken, Andrew (20 March 2016), "Scottish steel jobs saved as deal struck to reopen plants", Sunday Post
  37. ↑ Tata Steel plans to sell UK business, BBC News, 29 March 2016
  38. 1 2 "Tata Steel to sell off entire British business", The Guardian, 30 March 2016
  39. ↑ Farrell, Sean (4 February 2016), "Tata Steel reports £68m quarterly loss in face of cheap Chinese imports", The Guardian
  40. ↑ Holton, Kate; Bruce, Andy (30 March 2016), "Thousands of jobs at risk as India's Tata Steel seeks British exit", www.reuters.com
  41. ↑ Riley, Charles; Kottasova, Ivana (30 March 2016), "Cheap Chinese steel has claimed another victim", CNN Money
  42. ↑ Ruddick, Graham (30 March 2016), "Would Brexit help Britain’s steel industry?", The Guardian, Demand for the metal in the UK has never recovered since the financial crisis, remaining 30% lower than pre-2008 levels, while energy costs, business rates, and environmental taxes have further squeezed the industry. However, Tata and other steelmakers argue that the biggest problem is China dumping steel into Europe
  43. ↑ "Ministers 'blocking higher Chinese steel tariffs'", BBC News, 3 March 2016
  44. 1 2 Swinford, Steven; Evans-Pritchard, Ambrose (30 March 2016), "EU row over deal to save steel", The Daily Telegraph
  45. ↑ Kelsey, Chris (31 March 2016), "Government must back higher EU tariffs to save British steel industry, councils urge", www.walesonline.co.uk
  46. ↑ "David Cameron accused of failing UK steel after EU proposal rejected", The Guardian, 10 February 2016
  47. 1 2 Sources:
  48. ↑ Rodionova, Zlata (1 June 2016), "Tata Steel saves 4,400 jobs with sale of Scunthorpe site to Greybull Capital", Tata Steel saves 4,400 jobs with sale of Scunthorpe site to Greybull Capital
  49. ↑ Pickard, Jim; Campbell, Peter; Pooler, Michael (12 April 2016), "Tata Steel sets deadline of May 28 for sale of British arm", www.ft.com
  50. ↑ Wilson, James (1 May 2016), "Liberty House confirms it will bid for Tata Steel", www.ft.com
  51. ↑ Kelsey, Chris (3 May 2016), "Excalibur confirms bid to buy Tata Steel", www.walesonline.co.uk
  52. ↑ "Tata Steel UK says seven bidders express interest", BBC News, 9 May 2016
  53. 1 2 Davies, Rob (9 May 2016), "Tata Steel says seven firms in frame to bid for rest of UK operations", The Guardian
  54. ↑ Mundy, Simon; Pooler, Michael; Hollinger, Peggy (10 May 2016), "Indian group emerges as late bidder for Tata Steel", www.ft.com
  55. ↑ Afonso, Swansy; Chan, Vinicy; Philip, Siddharth Vikram (11 May 2016), "Tata Steel U.K. Unit Said to Attract China's Hebei Iron & Steel", www.bloomberg.com
  56. ↑ Marlow, Ben; Tovey, Alan (11 May 2016), "Turnaround fund Endless revealed as bidder for Tata's UK steel business", The Daily Telegraph
  57. ↑ Marlow, Ben; Tovey, Alan (21 May 2016), "US turnaround king shortlisted as saviour for Tata’s steel plants", The Daily Telegraph
  58. ↑ "Owners of beleaguered Port Talbot steel plant put its sale on hold while they assess impact of Brexit", www.thisismoney.co.uk, 4 July 2016
  59. 1 2 "Sale of Tata UK steel business on hold", BBC News, 8 July 2016
  60. ↑ "Tata Steel announces developments regarding the strategy for its European businesses" (PDF), www.tatasteel.com (press release), 8 July 2016
  61. ↑ "Tata Joint Venture Attracts Asian Steelmakers", news.sky.com, 9 July 2016
  62. ↑ Letter of Intent signed for potential sale of Tata Steel UK’s Speciality Steels business (press release), Tata Steel Europe, 28 November 2016, retrieved 19 December 2016
  63. ↑ "Tata Steel announces buyer for specialist business", BBC News, 28 November 2016, retrieved 19 December 2016
  64. ↑ Tata Steel UK reaches agreement with the trade unions to progress towards the closure of its defined benefit pension scheme to future accrual and take important steps towards a more sustainable future (press release), Tata Steel Europe, 7 December 2016, retrieved 19 December 2016
  65. ↑ "Tata Steel makes commitment to secure Port Talbot future", BBC News Wales, 7 December 2016, retrieved 19 December 2016
  66. 1 2 3 Our Operations, Tata Steel Europe, retrieved 20 March 2016
  67. ↑ Electrical Steels
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