Tata Steel sells 70 per cent stake in Southeast Asia biz to Chinese firm

Mumbai: As part of its strategic plan to exit non-core markets and focus more on the fast-growing home market, Tata Steel Monday signed an agreement to sell 70 per cent stakes each in its two Southeast Asian arms to the HBIS Group of China for around $480 million.

The company runs NatSteel Holdings in Singapore and Tata Steel Thailand, through a Singapore-based fully-owned subsidiary TS Global Holdings, which signed a definitive agreement with an HBIS Group-controlled entity-the second largest alloy maker in China — to divest its majority stakes in these two arms — a move closer to mark the Tatas’ long-awaited exit from these two markets.

The Chinese steel major will $327 million in cash to the Tatas and take over $150 million combined debt of these companies. Still the deal is 1.5 times the book value of these companies.

This is the second major deleveraging that Tata Steel has done in as many years having merged its heavily loss-making European operations with ThyssenKrupp last year by creating a new giant joint venture with the German engineering and alloy major.

The agreement was signed in Beijing, the company said, adding post-deal, the Tatas will continue to hold 30 per cent each in these two companies through TS Global Holdings.

“As per the agreement, the divestment will be made to a company in which 70 per cent equity will be held by an entity controlled by HBIS and 30 percent will be held by TS Global Holdings,” the company said.

While the enterprise value of the deal is estimated at around $685 million, Tata Steel is expected to get only around $327 million along with deleveraging of debt of around $150 million on both the entities.