Several British Steel bids reportedly expected by June 30

Amid uncertainty in the business climate, metal manufacturing giant in liquidation has been courting buyers.

    Accounting firm EY has been busy reaching out to Asian and European steel companies to find a buyer [Scott Heppell/Reuters]
    Accounting firm EY has been busy reaching out to Asian and European steel companies to find a buyer [Scott Heppell/Reuters]

    British Steel, which went into liquidation in May, has attracted interest from up to nine possible buyers, but far fewer firm bids are expected by an extended June 30 deadline, banking and industry sources told the Reuters news agency.

    Britain's second largest steel producer was put into compulsory liquidation on May 22 after Greybull Capital, which bought the company from Tata Steel for a token one pound ($1.27) three years ago, failed to secure extra funding to continue running it.

    A closure of the company, which produces high-cost long steel products used in building construction and rail networks, would jeopardise 25,000 jobs, including 5,000 in Scunthorpe, northern England.

    Sources told Reuters that the interested parties included India's JSW Group, former owner Greybull, Sanjeev Gupta's GFG Alliance, private equity firm Endless, a Ukrainian steelmaker, and two Chinese steel companies.

    One of the sources said that executives from multiple companies had been seen inspecting the Scunthorpe plant in the United Kingdom over the past three weeks, but only a handful would take the process further.

    "The number of serious bidders can be counted on one hand, especially if the ideal deal means an offer for the whole business," another source said, adding that the concern was profitability and the "need for a comprehensive turnaround plan".

    Uncertain business prospects

    Accounting firm EY, which is British Steel's adviser and Official Receiver appointed to help with liquidation, has been busy reaching out to Asian and European steel companies to sound out their interest. Many, however, have declined the invitation.

    The office handling the liquidation said in May that around 80 companies had been given access to the books, and said it had initially set a deadline of June 12 for finding bids. This was then extended to June 30.

    Sources previously told Reuters that none of the potential buyers would be willing to take on the whole company - even for a nominal sum - due to the need for capital expenditure to make it profitable after years of underinvestment.

    The European steel industry as a whole says it faces a crisis, as United States import taxes are pushing extra volumes of steel into Europe.

    On top of that, steelmakers in Britain pay some of the highest green taxes and energy costs in the world. They also face a higher cost of doing business and pay higher rates for labour.

    Industry executives say that uncertainty over Britain's departure from the European Union adds to the unpredictable business environment. It remains unclear whether the country would benefit from EU safeguarding measures to protect the European steel industry.

    British Steel has a series of contracts to supply steel rails to customers in Britain, Italy, Spain, Belgium and other European countries, as well as a 60,000 tonne-per-year supply contract with heavy-duty equipment maker Caterpillar.

    It sources iron ore and coal - essential primary materials in the making of steel products - from Australia, Brazil, and Argentina, among other countries.

    SOURCE: Reuters news agency