When it comes to the bidding for British Steel, it’s now out with the Turks and in with the Chinese.
It is all change at the sales counter in the process of hawking British Steel to the highest — or any — bidder.
Ataer Holding, a subsidiary of the Turkish military pension fund Oyak, saw its bid for the British Steel Group collapse last month when its terms were considered uneconomic.
Details are sketchy as to exactly what was the problem, whether it was the price, subsidies or conditions around employment.
But as controversial as a sale to the Turkish military pension fund would have been, a sale to a Chinese steel group is potentially even worse.
Arguably, China has been a part of the demise of the British steel industry for the last two decades and continues to depress global steel prices, perpetuating a marginal state of existence for not just British steel assets but also for much of Europe.
However, the British government — or, at least, the liquidator, no doubt with government approval, — has reached a deal with Chinese steel group Jingye. The Chinese group also operates hotels and real estate, employs 23,500 and has registered capital of 39 billion yuan ($5.58 billion), giving it the financial clout to invest, Reuters reported.
Jingye is no minnow when it comes to steel production, with a capacity of 15 million tons. Although no contractual guarantees have been given, the company has pledged to maintain as many jobs as possible. The amount being paid was not confirmed, but it is reported to be between £50 million and £70 million.
Jingye has pledged to invest £1.2 billion in the business over the next decade, upgrading the plants and machinery, the Daily Mail reported.
The government will be delighted to get British Steel off the books, as it has been costing £1 million a day to keep the group operating since May, when it collapsed and private equity owner Greybull Capital threw in the towel.
The paltry price tag — said to be no more than the operating cash in the company, probably comes with some government aid sweeteners — buys a group that includes steelworks at Scunthorpe and Teesside in northern England, as well as its European units (FN Steel in the Netherlands and British Steel France).
According to Reuters, European trade group Eurofer is looking into the deal from a state aid point of view. French authorities are considering seeking assurances from Jingye that it will guarantee supply to a factory in northeast France as a condition for its approval of the deal. The British Steel works supplies steel used to make specialized high-speed rails for France’s TGV network.
British Steel represents one-third of the U.K.’s steel output and produces long steel products used in construction and the rail industry in the U.K. and France.
Whether Jingye will see a profit out of the company remains to be seen, but maybe that isn’t even the point.
British Steel gives the group a presence inside the European market and, as such, may give them a seat at the European steel producers table.