Posted on 06 Nov 2019
The Chinese company in pole position to save British Steel is aiming to strike a deal to take over the failed manufacturer by the middle of this month, according to people briefed on the situation.
Jingye Group has emerged as the frontrunner to buy the stricken steelmaker out of insolvency, following almost six months of uncertainty for 5,000 workers who are mostly based at the large Scunthorpe plant in Lincolnshire.
It hopes to reach an agreement in principle with the official receiver in charge of the liquidation process by about November 10, said the people briefed.
Jingye’s eagerness to forge a new future for the UK’s second-largest steel producer will offer hope to employees, suppliers and communities who have endured a rollercoaster ride since the company collapsed in May after its requests for an emergency public loan were rejected.
But the attempted sale of British Steel has dragged on and there is no guarantee of a takeover by Jingye, which has returned to the sales process after previously withdrawing.
A rescue appeared possible this summer, when Ataer Holding, an investment arm of Turkey’s military pension fund, was named as the preferred bidder. But it failed to conclude a transaction during a 10-week period of exclusive talks that ended last month, because some large suppliers refused to accept price cuts on contracts.
Jingye, itself a steel producer, sparked a fresh bout of optimism after an entourage of its top executives, led by chairman Li Ganpo, travelled to the UK by private business jet last week to visit British Steel sites.
Its plans include boosting production from 2.5m tonnes a year to more than 3m, according to a presentation seen by the Financial Times. It also wants to upgrade existing equipment to save energy and improve efficiency, increase the use of scrap steel and reduce the plant’s carbon footprint.
“If the merger goes successful [sic], British Steel will not only be part of Jingye but also part of my life. We will do all we can to make it stronger and better,” read a slide in the presentation attributed to Mr Li.
However, the document also stressed that for British Steel to be profitable “it must cut costs”.
The Jingye delegation on Monday flew from the UK to France, where British Steel owns a factory that supplies rails to state-owned train operator SNCF. Any change in ownership of that facility is likely to require approval by the French authorities. On Monday Jingye held talks with the finance ministry there. “We will take into account their offer,” said one French official.
If Jingye does table a firm offer for British Steel, it is likely to be followed by weeks of final legal and administrative work before a deal can close.
With the UK braced for a December general election, a successful outcome could offer a campaign boon for the ruling Conservative party, which is targeting marginal seats in Labour heartlands such as Scunthorpe, which voted for Brexit.
Founded in 1994, Jingye today boasts production of 15m tonnes of steel annually and has 23,500 employees, as well as interests in hotels, 3D printing, tourism and real estate.
It is not the only horse in the race for British Steel. An outside contender is Liberty House, the UK-based industrial conglomerate led by Indian-born businessman Sanjeev Gupta that has acquired a number of struggling metals factories over the past few years.
Jingye did not respond to requests for comment. The insolvency service said the sales process was ongoing.
