InvestorQ : What happens to Tata Steel European operations now that the European buyers has opted to back out?
Ria Jain made post

What happens to Tata Steel European operations now that the European buyers has opted to back out?

Dia Deshpande answered.
12 months ago

You are right that the Swedish steel maker, SSAB AB, has decided to opt out of the race for the Dutch operations of Tata Steel after two of its large shareholders expressed deep reservations about the deal. SSAB has already indicated to Tata Steel that they may not be able to take the deal to its logical conclusion.

For now, SSAB has informed Tata Steel that the Swedish company may not be in a position to close the deal within the six-month internal deadline agreed to in November last year. The deal is not entirely off the table but Tatas continue to scout for other partners too. One major concern for the Swedish buyer is the concerns around higher carbon footprint.

Tata Steel operates the Ijmuiden plant in the Netherlands which has about 7.5 MTPA of steel manufacturing capacity. It also happens to be a profitable plan. The two investors who are doubtful about the deal are mining companies and have a 21% stake in SSAB. However, these are news reports based and Tatas has not offered any comment on the issue.

One more challenge that SSAB sees in the deal is to secure regulatory clearances from the European Commission as the major concern of the EC would be to prevent price cartelization. In Europe, steel is already concentrated in just a few hands with Arcelor Mittal accounting for over 50% of European steel capacity.

Back in 2019, it may be recollected that Tata Steel’s proposed merger with German steel giant Thyssen Krupp was called off after the European Commission set stringent conditions that virtually made the deal unviable. As a result, the potential merger between SSAB of Sweden and Thyssen Krupp of Germany was also called for the similar reason.

For the Tatas, the European operations are like an albatross round the neck as it carries high operating expenses and over $2 billion in accumulated debt, that is getting increasingly difficult to service. The sale of the Dutch plant was crucial to the plans of Tata Steel to hammer out a solution for the UK operations of Tata Steel.