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UK Pension Regulator Clears Plan to Separate British Steel Pension Scheme from Tata Steel
Friday 11 August 2017

11 August 2017 - Indian steelmaker Tata Steel (NSE: TATASTEEL) has received clearance from the UK Pensions Regulator regarding the separation of the British Steel Pension Scheme from Tata Steel, which is an important step in the Indian firm's plan to merge its UK and European steel operation with those of German steelmaker Thyssenkrupp, the company said on Friday.

However, Thyssenkrupp has expressed its caution at getting into a scheme in which it would take on Tata Steel's GPB 15bn pension obligations in the UK.

When the RAA takes effect, Tata Steel will pay GBP 550m into BSPS and will also give the British Steel Pension Scheme a 33% equity stake in Tata Steel UK Ltd.

Members of the BSPS will have the option of switching to a new scheme (the New BSPS) or moving with the old BSPS into the Pension Protection Fund.For the New BSPS to come into effect, it will be subject to certain qualifying conditions relating to factors such as size and funding level.

The New BSPS will be sponsored by TSUK, meaning that TSUK would have legal obligations to fund the New BSPS if it fell into deficit.

In April, Indian steelmaker Tata Steel's Tata Steel UK subsidiary agreed to sell its Long Products Europe business to investment firm Greybull Capital, the company said.

The sale, for a nominal consideration, would be in exchange for Greybull Capital taking on the whole of the business, including assets and relevant liabilities, and securing an appropriate funding package.

Tata said that the deal would be completed once a number of outstanding conditions have been resolved, including transfer of contracts, certain government approvals and the satisfactory completion of financing arrangements. 

The Long Products Europe business employs 4,800 people - 4,400 in the UK and 400 in France.

This agreement follows an accelerated process of negotiations between Tata Steel UK and Greybull Capital.

Tata said the agreement is an important milestone on the road towards continuing steelmaking in Scunthorpe and steel processing in other locations in the UK and France.

The sale covers several UK-based assets including the Scunthorpe steelworks, two mills in Teesside, an engineering workshop in Workington, a design consultancy in York, and associated distribution facilities, as well as a mill in northern France.

Also in April, Tata Steel named Bimlendra Jha, an executive committee member of Tata Steel Europe, as the chief executive officer of Tata Steel UK, the company said.

Jha is currently executive chairman of Tata Steel Europe's Long Products Europe business and has successfully led the divestment process that resulted in the signing of a sale and purchase agreement with Greybull Capital on April 11.

In this new position, Jha will report to Hans Fischer, chief executive officer of Tata Steel Europe.

Tata Steel is Europe's second largest steel producer, with steelmaking in the UK and Netherlands, and manufacturing plants across Europe.
Date Published: 11/08/2017
Target: Tata, UK and European operations
Country: UK
Sector: Metals/Mining
Type: Divestment
Status: Agreed
Vendor: Tata Steel
Buyer: Thyssenkrupp
Tata wins important pension plan approval, yet Thyssenkrupp still cautious regarding ongoing obligations to fund UK pensions