Tata Steel to sell Southeast Asia units to China’s HBIS.
KOLKATA February 01, 2019 – TS Global Holdings (TSGH) Pte, a wholly owned subsidiary of Tata Steel has signed definitive agreements with the state-owned HBIS Group of China to divest majority stake in its South-East Asia business in a $327 million deal.
TSGH executed the definitive agreements in Beijing on Monday with HBIS Group Co Ltd controlled entity to divest its entire equity stake in NatSteel Holdings Pte and 67% stake in Tata Steel (Thailand) Public Company Ltd.
As per the contract, the divestment will be made to a holding company in which 70% equity shares will be held by the entity controlled by HBIS and 30% by TSGH, an official statement from Tata Steel said.
“Tata Steel Group and HBIS Group have been in discussions in relation to the future of the South-East Asia business, TV Narendran, Tata Steel CEO and managing director, said. “The definitive agreement signed between the two companies is a significant milestone in our strategic relationship, offering the SE Asia business robust growth opportunities, given the access to resources, technical expertise and HBIS’ regional understanding.”
The deal includes Tata Steel’s steel business in Vietnam, Narendran told a conference call later.
Tata Steel will get two board positions in the holding company, while at the management level, the deputy CEO and deputy CFO will be Tata Steel nominees. The new entity will have an enterprise value of $685 million and a debt of $120-150 million.
Tata Steel CFO Koushik Chatterjee said proceeds from the deal will help the company bring down its consolidated debt by around $450 million. “Tata Steel will stay invested in the SE Asia business by retaining its 30% stake in the holding company for another 2-3 years,” he added. “Thereafter, we may look at ways to monetise it, including the option for an IPO. We will take a call on it later.”
The deal completes Tata Steel’s plan to divest its businesses in “other geographies” like Europe and SE Asia. “We are keen on creating structurally strong enterprises that stand on its own,” Narendran said, stressing on the group’s renewed focus on the home market. “If we have to invest capital, we would rather invest in India, which allows a lot of growth opportunities.”
Compared to the 80-90-million-tonne steel market in SE Asia, which is growing at 7-8% annually, China’s home market for steel has seen a slowdown in growth, driving an increasing number of Chinese steelmakers seeking growth opportunities in SE Asia.
The $40-billion HBIS Group was established in June 2008 by the merger of Tangshan Iron and Steel Group and Handan Iron and Steel Group of Hebei Province and is among the largest steelmakers in the world. Ranked 239 among Fortune Global 500, it is a leading player in China’s home appliance, automotive steel, and supplies steel for nuclear power, marine engineering, bridges and construction.