Turkey's military pension fund reaches British Steel deal (updated)

Eregli Demir ve Celik Fabrikalari

16/08/2019 09:36

* Hurdles remain, union warns of Brexit complications
    * British Steel continues to supply customers
    * Turkey, EU steelmakers at odds over surplus steel

 (Adds detail, official receiver statement, context, analyst
comment)
    By Ceyda Caglayan and Barbara Lewis
    ISTANBUL/LONDON, Aug 16 (Reuters) - Turkey's military
pension fund OYAK has reached a provisional agreement to take
over British Steel and could close the deal by the end of this
year, potentially saving thousands of jobs.
    The British government welcomed the deal, but the country's
largest union said ministers needed to work to protect the
industry from potential damage from Brexit.
    British Steel was put into compulsory liquidation on May 22
after Greybull Capital, which bought the firm for one pound from
Tata Steel  TISC.NS  three years ago, failed to secure funding
to continue its operations. urn:newsml:reuters.com:*:nL5N22Y1RS
    Closure of the company, which produces high-margin, long
steel products used in construction and rail networks, would
jeopardise 5,000 jobs in Scunthorpe, northern England, and a
further 20,000 jobs in the supply chain.
    Ataer Holding, an affiliate of Turkey's military pension
fund OYAK, said on Friday it would have the exclusive rights to
carry out due diligence on British Steel and expects to finish
this in October and the deal could be completed by year-end.
    Ataer has nearly 50% of Turkey's biggest flat steel producer
Erdemir  EREGL.IS .
    Business Secretary Andrea Leadsom welcomed the deal as a
positive step forward in securing British Steel's future. She
also said she was committed to "a modern and sustainable future
for the industry".
    The Official Receiver said it was focused on finalising the
sale over the coming weeks, during which time British Steel
would trade and supply its customers as normal.    
    Union workers said the news was a relief. But leading union
Unite said the government would have to help with high energy
costs and to stave off risks associated with the government's
insistence on leaving the EU on October 31 with or without a
deal.
    Unite said it was "essential that the government acts to
prevent a disastrous no-deal Brexit which would lead to cheap
steel being dumped in the UK market".
    The European Commission had no immediate comment.    
    EU steelmakers have been at odds with Turkey as they debate
safeguards to protect themselves from the impact of U.S. trade
tariffs.
    The tariffs have pushed surplus steel into Europe,
especially from Turkey, which has overtaken China as the EU's
biggest foreign steel supplier.  urn:newsml:reuters.com:*:nL8N23P5R4
    The head of OYAK's Mine and Metallurgy Department Toker
Ozcan said the group's priority was to increase production
capacity and invest in clean steel making.
    Industry sources previously said British Steel would
struggle to find a buyer willing to keep it intact because of
the amounts of capital needed after decades of under-investment.
    The government has in principle agreed to provide aid,
sources said last week. The government declined to comment.
 urn:newsml:reuters.com:*:nL8N2548ET
    Under former prime minister Theresa May, the British
government was willing to respect EU state aid rules that
prevent government support to industry if it creates unfair
competition, government sources have said.
    Under Prime Minister Boris Johnson, the determination to cut
ties with Brussels whatever the cost has hardened.
    Analysts' initial view of the deal was positive.
    "Ataer requiring more steel for its ‘downstream’ plants,
means production in the UK could increase post-sale, which would
be very good news for the domestic workforce," John Cullen,
 business recovery partner  at accountancy firm,  Menzies, said.

 (Reporting by Ceyda Caglayan, Ezgi Erkoyun and Daren Butler in
Istanbul and Costas Pitas, Eric Onstad and Barbara Lewis in
London; editing by Jason Neely and Jane Merriman)
 ((daren.butler@tr.com; +90-212-350 7053; Reuters Messaging:
daren.butler.thomsonreuters.com@reuters.net))