A deal has been agreed between Chinese giant Jingye Group and the Official Receiver for British Steel, potentially saving 4,000 jobs and priming the business for future growth.
As anticipated, heads of terms have been met on an asset purchase agreement, with a £70 million figure understood and a pledge of .
A statement from The Insolvency Service said: “The Official Receiver and special managers from EY can confirm that a sales contract has been entered into with Jingye Steel (UK) Ltd and Jingye Steel (UK) Holding Ltd (together, Jingye), to acquire the business and assets of British Steel Limited (BSL), including the steelworks at Scunthorpe, UK mills and shares of FN Steel BV, British Steel France Rail SAS and TSP Engineering.
“The sale also includes the shares owned by BSL in Redcar Bulk Terminal Limited.
“Completion of the contract is conditional on a number of matters, including gaining the necessary regulatory approvals. The parties are working together to conclude a sale as soon as reasonably practicable.
“The business will continue to trade as normal during the period between exchange and completion. Support from employees, suppliers and customers since the liquidation has been a critical factor in achieving this outcome.”
Jingye Group’s chairman Li Ganpo led a high profile visit just over a week ago, flying into Humberside Airport in a company jet and meeting management, council leaders and the Official Receiver, as well as North Lincolnshire MPs before parliament was dissolved.
A large Chinese team have been working through due diligence at the Scunthorpe site. It has now set out its plans.
In a statement, the Department for Business, Energy and Industrial Strategy described it as "an important step towards securing steel making operations at British Steel’s sites in the UK".
"The government continues to work with the Official Receiver and Jingye on the next stage of the sales process," it added.
The company swooped after an exclusivity period with initial preferred bidder, Turkish operator Ataer, expired – opening the door to other parties.
British Steel was placed into compulsory liquidation after a High Court hearing revealed debts of £880 million. Greybull, in charge for just short of three years after buying the business for £1 from Tata, was removed from control.
We are pleased to announce #Jingye Group has signed an agreement to purchase British Steel pic.twitter.com/HYNDj611iH
— British Steel (@BritishSteelUK) November 11, 2019
CBI regional director for Yorkshire and The Humber, Beckie Hart, said: "This welcome news is relief for thousands of workers up and down the east coast that the long-mooted deal has been agreed in principle.
"We must wait and see all the details but today is a day to welcome this news, with a key site and many jobs saved.
"The government can and must keep a watching brief on this and make sure that all the support needed as available. British Steel is the heartbeat of the region and we must fight tooth and nail to keep it running."
The GMB greeted the speculation with cautious optimism.
National officer Ross Murdoch said: “On the face of it we cautiously welcome this sale which finally provides some light at the end of the tunnel for 4,000 British Steel workers.
“GMB also met with Chairman Li and his senior team in Scunthorpe. We were impressed with the passion and enthusiasm from the Jingye team.
“However due diligence on this sale was completed very quickly and the devil will be in the detail.
“As such we will seek an urgent meeting with the Jingye Group to discuss their precise strategy.
“GMB’s position is the new owner takes on the whole workforce on existing terms.”
Dr Jonathan Owens, logistics expert from the University of Salford Business School, believes this will prove to be long-term investment.
He said: “Assuming there are no unforeseen problems with purchase, it will be interesting to understand what Jingye’s medium and long term recovery plans are for the plant. One strategic viewpoint could be to develop capacity for subsidised raw material into the UK market, which may be likely in the long-term not to be subject to high EU tariffs and, it can get enhanced leverage in the UK economy too.
“This investment should not be for the short term and seen as a benchmarking and knowledge stripping exercise though. Scunthorpe was initially the first to develop and apply technology that allows production of high grade steel with better reliability. In the past it has successfully fended of cheaper imports from China. Whilst other steel mills around the world have applied similar technologies, Scunthorpe is still considered ‘word class’ and the most experienced plant utilising this technology, and it still supplies Network rail for the UK’s railway track infrastructure today.”
