Greybull Capital, the British family office that purchased Tata Steel’s European Long Products division this week, expects to return the loss-making business to profitability within one year, despite intense pressure from Chinese rivals.
The statement from Marc Meyohas, co-founder of Greybull Capital and former CEO of Cityspace, comes shortly after the family office announced plans to buy Tata Steel’s Scunthorpe-based plant, saving 4,400 jobs.
For a nominal fee of £1 alongside a £400 million ($570 million) investment package, the industry-saving deal includes two mills in Teesside, an engineering workshop in Workington, a design consultancy in York, a mill in Hayange, France, and distribution facilities.
Tata is still seeking a buyer for its Port Talbot steelworks and the rest of its UK business, which currently employs around 15,000 members of staff.
Greybull Capital has experience rescuing distressed assets under difficult market conditions. It holds investments in pharmaceuticals, semiconductors, energy, industrials, retail and leisure across the UK, mainland Europe, and the US.
Founded in 2008 by Nathaniel and Marc Meyohas, the Knightsbridge-headquartered family office is best known for turning around the UK budget airline Monarch, returning it to profit in 2015 after buying a 90% stake following a £125 million deal in 2014.
Greybull confirmed it is currently looking for growth opportunities for Monarch with a sale may also be on the horizon.
Meyohas said the existing turnaround plan for the Scunthorpe plant had been designed and implemented with the full clout of the Indian conglomerate, adding that it would have likely returned the business to profitability had they decided to retain the asset.
The French-born investor discussed the plan: “We believe this business is viable for three reasons. One is the people, and in any turnaround you have to have a capable, committed workforce, and we have that in absolute abundance here.”
“The second is the quality of the turnaround plan, it’s a cost-led plan and a lot of the big decisions have already been made and implemented. There were difficult decisions, like disposing of the mills in Scotland and shutting down one of the coke ovens in Scunthorpe, which significantly reduced central costs,” he added.
“And number three, the business itself, you can’t easily reinvent something of this scale and this importance and this industrial footprint. So we think, at its core, it’s a very, very good business,” he concluded.
While Meyohas remained positive about the future, industry experts are less confident about their ability to save the 100-year-old plant, which is reportedly losing £1 million a day. Tata Steel’s own finance director last month said that its UK assets have a book value of “almost zero”.
Confounding the situation is the flood of cheap Chinese steel into the UK. Their state-backed steel producers have ramped up production in the past 15 years and now produce 800 million tonnes of steel, compared to the UK’s 12 million.
The Meyohas brothers say they are currently solely focussed on the Long Products deal but add that they have not ruled out the acquisition of other Tata divisions.
“Once we buy this business any opportunities that come up we will be reviewing as we would do with any of our other companies.So as active shareholders we’re always interested in growth, we’re always interested in add-on opportunities, and if opportunities are presented to us that could add value to what we have, it would be in our DNA to look at that kind of stuff,” Meyohas explained.
Greybull plans to resurrect the British Steel brand for its Scunthorpe plant, which was acquired as part of the deal, saying it is an iconic title with an incredible heritage that will do justice to its future plans.