UK confident of British Steel-Jingye deal, but also eyeing ‘plan B’

The UK government is confident the purchase of British Steel by Chinese steelmaker Jingye will go ahead but officials are meeting other parties interested in the company, a spokesman for the Department for Business, Energy and Industrial Strategy said Wednesday.

The statement comes after the Guardian newspaper reported that the UK government had also started to talk with Turkish conglomerate Cengiz Holdings as a backup.

Cengiz Holding did not immediately respond to a request for comment.

“Officials have met and continue to meet all parties interested in acquiring British Steel as the government is not party to the exclusivity agreement signed by the bidder and the official receiver. The government believes the Jingye transaction will complete in the coming weeks,” the BEIS spokesman said.

British Steel has production capacity of 3 million mt a year at sites in the UK, France and the Netherlands.

Cengiz Holding has huge investments in the construction, energy, mining and tourism sectors in Turkey and its CEO, Mehmet Cengiz, has close relations with the Turkish government.

After the exclusive acquisition talks between the Official Receiver of British Steel and the preferred bidder, Turkey’s OYAK, failed in October last year, Jingye started takeover negotiations.

The Official Receiver said Wednesday that if discussions were taking place with Cengiz or any other third party, it did not involve them.

The Official Receiver also said that Jingye was currently engaging with EU regulators to secure the necessary approvals to complete the purchase of British Steel. The process would take some time “and it is not possible to put a specific timeframe on it.”

Although the UK is set to leave the EU on January 31, the merger requires approval from a number of European regulators, both at the national level and by the EU.

Some market sources are skeptical about the deal with Jingye, saying they believe the UK government is too and that this is why it is in touch with other parties. They said Jingye was mainly interested in the Redcar Bulk terminal rather than the steel plant. The port is half owned by British Steel and half owned by the UK government. It is only one of four UK ports capable of handling Capesize vessels.

Market sources said the government is very committed to finding a solution for British Steel, the UK’s second largest steel producer, particularly after Scunthorpe, where the company is based, returned a lawmaker from the ruling Conservative Party for the first time in decades in the recent parliamentary election.

“The French government’s approval is also required for the sale of British Steel’s Hayange plant, and it is interesting to note that the French government is skeptical about it,” a source close to the deal said. But he is also underscored that the French government would never act against the UK government. “The French government met the Chinese group too to seek assurances from Jingye, but it also has a plan B.”

The French government put Hayange up for sale separately as a contingency plan in case the deal with Jingye does not go through. According to the source close to the deal, the deadline for bids has been moved to end of February to not create any obstacles to the talks with Jingye.

Jingye did not respond to a request for comment, but sources said it was committed to closing the deal by the end of the first quarter.

— Annalisa Villa, Cenk Can