Tata Steel to raise $7 billion from sale of Netherlands business

2020-11-27

Nov. 26, 2020 - Tata Steel targets to raise around $7-8 billion from sale of IJmuiden Steelworks in Netherlands to Swedish steel giant SSAB. According to two sources in investment banking, the due diligence is reaching advanced stage and the financial offer is expected by January. 

"Tata Steel is running a profitable business in Netherlands and it is a strategic fit for SSAB. IJmuiden steel mill and the related downstream assets are jointly valued at $7-8 billion. The officials from SSAB are evaluating the assets. They will come up with a binding offer after they complete the technical and financial assessments," a senior banker said.

Tata Steel Europe is presently looking to decouple the 'problem business' in the UK from profitable business in the Netherlands as the process will fetch two benefits. The UK government is ready to support the steel company, but administrators fear that the benefits extended to the UK entity may be transferred to the Dutch business also. So, the separation of business will help the company receive the government aid. Secondly, the buyers don't want to shoulder the struggling business in Port Talbot, UK.

The expectation is for $7-8 billion, but it is not clear whether SSAB will want it as a discounted purchase because of the prevalent negative market condition in Europe. Materialising the deal of over Rs 50,000 crore will drastically cut down the net debt of Tata Steel to half from Rs 96,500 crore in September. Tata Steel acquired the European business of Corus Plc for $12 billion in 2007 in an open bid. But the entity has been mostly registering losses since the recession in 2009. 

The IJmuiden site is the main hub of Tata Steel in the Netherlands, which also comprises downstream production locations elsewhere in the country. IJmuiden produces around 7.3 million tonne of strip steel a year, serving customers in the automotive, engineering, packaging and construction sectors. However, Tata Steel has cut down production in Port Talbot to 3 MT from 10 MT over the years.