The government has agreed to provide financial support to British Steel potentially worth hundreds of millions of pounds, paving the way for Turkey’s military pension fund to secure the company’s immediate future.
Although no deal has been finalised, Labour Heartlands understands the Government has agreed to provide a £300m package of support to British Steel.
Ataer Holding is a wholly-owned subsidiary of Turkey’s state military retirement scheme Oyak – also the largest shareholder in Turkish steel group Erdemir.
This would give Turkey’s military pension fund Ataer Holding a formal period of exclusivity within which to complete a takeover of the UK’s second-largest steel producer, which employs thousands of people across the UK, including 700 in North-East sites at Lackenby and Skinningrove.
Ataer, which is a subsidiary of Oyak, Turkey’s military pension fund, is understood to have submitted a formal and final offer for British Steel earlier on Friday to the OR following the government’s endorsement of a support package.
The Turkish fund has offered a headline price of between £60m and £70m to take control of British Steel, according to sources.
Oyak is itself the largest shareholder in Erdemir, the Turkish steelmaker which had denied earlier reports that it was associated with the bidding process.
One person close to the discussions, which are being led by EY on behalf of the OR, said a deal would lead to the production of “the greenest steel in Europe” because of Ataer’s plans to convert British Steel’s Scunthorpe plant to using gas in the coming years.
Ministers are also said to have settled on a remedy for the problem of EU carbon credits, which forced the company to seek an emergency £120m loan from the government in April.
Details of that solution were unclear on Friday afternoon.
An announcement about formal exclusivity being granted to Ataer is likely in the next few days, with a further period of between six and eight weeks of due diligence likely to follow.
Whoever takes the company over, Redcar MP Anna Turley called the reported financial package “welcome news”.
She said: “The Government, the Official Receiver and the wider British Steel Support Group and the trade unions have been committed to leaving no stone unturned in the search for a buyer for British Steel.
“The priority has been finding a solution which guarantees a long term future for the business in its entirety and supports the wider British steel industry.
“I have been clear that government needed to step up and offer whatever financial and other support was required to pave the way for a successful deal and so this reported support package is welcome news. In 2015 when the SSI works in Redcar fell into liquidation, Government immediately stepped away, so I am relieved that lesson has been learned.
Other interested parties
If discussions with Ataer break down, three bidders are waiting in the wings: Liberty House, led by Indian-born metals tycoon Sanjeev Gupta; Greybull Capital, the investment group which owned British Steel when it collapsed; and the west African consortium led by an as-yet unnamed civil engineering firm.
While not revealing its identity, the firm said it would not require any government assistance or grants, unlike some of the rival bids.
“The consortium is working on a long-term massive infrastructure project in west Africa,” said a source close to the company, which has masked its identity. “The successful purchase of the Scunthorpe site would mean an export opportunity of steel to this project – with immediate effect.
“The project has an estimated 10-year delivery timescale and has multiple related additional export opportunities for British steel to the region.”
Liberty House would prefer to convert the Scunthorpe works from a blast furnace plant, which makes steel from scratch. It seeks government loan guarantees to replace the blast furnaces with electric arc furnaces, which would be used to make products by recycling scrap steel.
Liberty House, led by the Indian-born metals tycoon Sanjeev Gupta, would prefer to convert the Scunthorpe works from a blast furnace plant, which makes steel from scratch. It is seeking government loan guarantees to replace the blast furnaces with electric arc furnaces, which would be used to make products by recycling scrap steel.
Greybull Capital, the investment group that owned British Steel when it collapsed into insolvency, is understood to remain interested in picking up parts of the business if the government’s preference for selling the whole business does not materialise. In that scenario, the Scunthorpe steelworks would be likely to close for good.
British Steel, which employs more than 3000 people at Scunthorpe and is responsible for about 25,000 jobs overall, is losing roughly £5m-a-week, according to sources.
Allowing Greybull to cherrypick the best parts of a business that it owned when it collapsed could prove politically unpalatable, observers have said.
It’s not ‘Nationalisation’ but at this point it could be saving jobs and skills we as a country cannot afford to lose.
British Steel should be nationalised LINK