Indian steelmaker Tata Steel’s plan to sell its Dutch operations to Swedish steelmaker SSAB AB has run into troubles as two SSAB shareholders have expressed reservations about the deal. Tata Steel had entered a deal with the Swedish steel maker in November last year to sell its Dutch operations including the IJmuiden plant with an annual capacity of ~7.5mn tonnes within six months. Although the deal is not cancelled, it is unlikely to meet the set timeline of six months from November as mining company LKAB and asset manager Industrivarden who together hold 20.9% of SSAB are resisting the deal. According to a Swedish business daily Dagens Industri source, “There are several issues that could potentially stall the deal,… This includes concerns around higher carbon footprint for the Swedish steelmaker, which will come with the acquisition, and this is something a section of SSAB’s shareholders are not comfortable with as things stand.” There is also the challenge of regulatory compliances set by the European Commission (EC) due to sector concentration. In 2019, Tata Steel’s proposed merger with Thyssenkrupp was rejected by the EC. Another merger between SSAB and Thyssenkrupp also failed due to non-compliance with EC regulations. A steel sector analyst commented, “In Europe, the steel sector concentration is already on the higher side, with just about half the market with ArcelorMittal. So, the EC will be particularly concerned about a single producer gaining significant market share”. The sale of the profitable Dutch operations is important to Tata Steel as it could help it fund a rescue plan for its UK operations in Port Talbot.
Abja Investment’s, a wholly owned subsidiary of Tata Steel, bonds were largely stable. It’s 5.95% 2024s and 4.95% 2023s are marginally up this morning to trade at 107.5 and 102.13 respectively.
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