Moves to allay Corus takeover collapse fears
Apr 30 2009 By The Journal
STEEL company Corus is trying to allay fears for the future of 2,000 jobs amid rumours a takeover deal for its Teesside plant is close to collapse.
The Anglo-Dutch firm, now owned by Indian industrial group Tata, agreed in January to sell a majority stake in its Redcar plant Teesside Cast Products (TCM) to a consortium of buyers led by Italian family firm Marcegaglia. The deal is worth £328m.
But reports yesterday suggested Marcegaglia has cold feet because of the effects of the global economic downturn on the steel industry, which is expected to suffer from a 15% fall in output this year.
It is understood the Italian group believes it may be better to pay a penalty fee for breaking the deal rather than press ahead with the purchase. However, a TCM spokeswoman said: "A memorandum of understanding is still in place and we have not had any contact from Marcegaglia on the subject."
The deal is the subject of due diligence procedures and ownership is expected to be transferred in the summer. The second element of the deal is a 10-year contract for the consortium to buy steel from Redcar.
The town’s MP Vera Baird said: "If that’s still there, then even if the story is true, it may not be as bad as it sounds. There seems nothing in there to suggest the 10 year contract is in danger."
Investment to upgrade the facilities at TCM, which makes large steel slabs used in iconic structures such as Canary Wharf and the Sydney Harbour Bridge, is likely to be needed to improve its equipment within the next few years.
Andrew Kostas, chief executive of steel industry news and information portal Steelonthenet.com, said he would be surprised if the takeover now went ahead.
"It’ll be a tremendous disappointment on Teesside but steel is a very high fixed cost business. Particularly in this downturn, it would have been frankly quite a strange move to make – steel is a particularly capital intensive industry," he said. "Twelves months ago, when steel was in short supply, yes but that was 12 months ago."
He said the cost of improving the facilities at Redcar would be "colossal" and he believed it would be a "bizarre move" if Marcegaglia went ahead with the deal.
TCM has already reduced output by 30% to safeguard jobs in the short-term and is in talks with unions on further cost-cutting measures.
Corus announced the Marcegaglia deal three months ago when it also revealed plans to axe 3,500 jobs worldwide.
TCP has been run as a separate business since a Corus restructuring operation in 2005.
Corus and Marcegaglia were both unavailable for comment. The Community union, which represents the majority of the steelworkers on the site, declined to comment.