Tata Steel has sold its Long Products Europe business, including its Scunthorpe plant, to investment firm Greybull Capital for a token £1 or €1.
The move will safeguard 4,400 UK jobs, but workers are being asked to accept a pay cut and less generous pension arrangements.
Greybull said it was arranging a £400m investment package as part of the deal.
The business will be rebranded as “British Steel” once the deal is completed in eight weeks, it said.
The new business would include the Scunthorpe works, two mills in Teesside, an engineering workshop in Workington, a design consultancy in York, a mill in Hayange, France, and sales and distribution facilities.
The token sale price reflects the difficulties involved in turning around the loss-making business, but Greybull partner Marc Meyohas said he was “delighted” with the agreement and believed the division could become a “strong business”.
“At its core, it’s a very, very good business,” he said.
He also said Greybull had not ruled out buying other parts of Tata’s UK steel business.
The Long Products Europe business makes steel for the rail and construction sectors.
The division was put up for sale in 2014. Greybull, whose interest was widely known, has been in talks with Tata for the past nine months over a possible deal.
Greybull is backing a turnaround plan, which aims to return the loss-making business to profitability within one to two years, but will involve significant cost savings.
Staff are being asked to accept a 3% pay cut for one year and reductions to company pension contributions. A staff ballot on the changes will be completed on 19 April.
But Greybull said its plan “to reset the cost base of the business” had already been agreed with both trade unions and key suppliers.
Greybull also said it did not expect further restructuring beyond the 1,200 job losses announced last October.
That involved the closure of one of the two coke ovens at Scunthorpe and the mothballing of three plate mills, reducing annual production capacity to 2.8 million tonnes.
Unions welcomed the deal.
GMB national officer Dave Hulse said negotiations had taken “a long period of time”, but said the deal would “safeguard members’ jobs”.
Roy Rickhuss, general secretary of the Community union, said the announcement “demonstrates that with the right investors, UK steelmaking can have a positive future”.
Business Secretary Sajid Javid said the agreement was “a step in the right direction for the long-term future of British steel manufacturing in Scunthorpe”.
“This agreement sends positive signals to any potential investor for the rest of Tata’s UK business,” he added.
Mr Javid is due to address MPs later on Monday on the government’s progress in helping to find a buyer for the rest of Tata’s loss-making UK business.
‘Eye off the ball’
The Indian steel giant said at the end of last month that it was exploring “strategic alternatives” for its UK business.
Thousands of workers in England and Wales risk losing their jobs if a buyer cannot be found.
Tata directly employs 15,000 workers in the UK and supports thousands of others, across plants in Port Talbot, Rotherham, Corby and Shotton.
So far, the only company to have publicly expressed an interest in buying Tata’s UK steel business is Liberty House, owned by Sanjeev Gupta.
Mr Javid, who was on a business trip to Australia when Tata first announced it was planning to sell its UK steelworks, is under pressure over his handling of the crisis.
The business secretary has admitted he was caught unaware by Tata’s announcement, telling the BBC that while he had known the firm was reviewing its UK operations, it had gone “much further than we expected”.
Unions have accused the business secretary of “taking his eye off the ball” and have called for him to stand down if a buyer for the steelworks is not found.
The steel industry crisis has been driven by falling prices and a global oversupply. In the UK, high energy costs and cheaper Chinese imports have exacerbated the issue.
However, China’s ambassador to the UK Liu Xiaoming, on Monday complained that the country had been made a “scapegoat” over the steel crisis.
“Making China the ‘scapegoat’ only misleads the public and contributes nothing to the solution of the problem,” he wrote in the Telegraph.
What’s wrong with the BBC? This entry passed through the Full-Text RSS service – if this is your content and you’re reading it on someone else’s site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers.