A rescue deal for British Steel has edged closer after bidder Jingye received support from regional authorities in China to push through the takeover of the ailing UK steelmaker.
The 5,000 workers at the stricken company have been facing an uncertain future after it collapsed into liquidation in May when its owner, the buyout group Greybull Capital, failed to obtain an emergency loan from the UK government.
An attempt to sell the group to Ataer Holding, an investment arm of Turkey’s military pension fund, fell through after 10 weeks of exclusive talks.
Jingye emerged in the autumn with a £50m rescue deal to save the UK’s second-largest steelmaker.
The conglomerate, which is chaired by businessman and former Chinese Communist party official Li Ganpo, has put forward plans to invest £1.2bn in British Steel and ramp up production by cutting costs.
The company had to obtain relevant approvals as part of its asset purchase agreement from two quangos in the province of Hebei, where it is based — the Hebei Bureau of Commerce and the Hebei Development and Reform Commission.
While all foreign deals by Chinese companies require approval from Beijing in relation to capital controls, the initial sale price of British Steel sits well below the $300m threshold for greater scrutiny from Beijing.
Now, Jingye’s attention will switch to union negotiations and clearance from the French government, where British Steel owns a plant that makes tracks for railways and tram lines, in a bid to complete the deal in the coming weeks.
The Hayange plant is crucial for providing rails for France’s state-owned train operator SNCF and Paris can veto any change in ownership of what it deems strategic industrial assets.
Jingye will meet unions over the coming weeks to lay out the details of its investment plan as well as to iron out the terms and conditions of new employment contracts.
The company plans to discuss future staffing levels and conditions and wants to retain as many jobs as possible, according to two people with knowledge of the discussions, although no guarantees have been given.
Since May, the UK Insolvency Service has been in control of the metal manufacturer, which has been bankrolled through a taxpayer indemnity estimated to have cost the public tens of millions of pounds.
Jingye has already incorporated new companies in the UK for when it begins running British Steel.
However, the Chinese company is struggling to negotiate new contracts with suppliers, a stand-off which has continued into 2020.
Executives from Jingye had met big suppliers before Christmas to discuss payment terms and contract prices but suppliers have been keen to stick to old conditions. “It is an issue that the suppliers are still holding out,” said one person familiar with the matter.
Another person briefed on the talks said that British Steel could look for other providers of industrial gases and port services should its current suppliers not prove willing to accept price cuts.
Andrea Leadsom, business secretary, told the Financial Times that the regional Chinese clearance was welcome news and that she was confident of a sale being finalised soon.
“I am completely committed to getting a good outcome for British Steel and their valued employees at Scunthorpe, Skinningrove and on Teesside,” she said.
Jingye declined to comment.
The Insolvency Service said: “Everything is on track and Jingye remain actively committed.”
Additional reporting by Christian Shepherd
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January 09, 2020 at 12:53AM
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British Steel rescue nears after backing from Chinese regions - Financial Times
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