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Brexit Leaves Fate of Tata Steel U.K. All the More Uncertain
06/27/2016 - The United Kingdom’s vote to secede from the European Union will complicate Tata Steel's efforts to sell its U.K. strip business and may, in fact, give the company more of a reason to hold on to the business, according to reports.
As The Wall Street Journal reported, the country’s decision to leave the union creates uncertainty over how it will extricate itself from, among other things, trade relationships and immigration rules.
“Trade negotiations with potential buyers will not be easy as business activity in the region will take a hit,” Goutam Chakraborty, an analyst at Mumbai-based Emkay Global Financial Services, told The Journal.
He told the newspaper that potential investors probably will “wait and watch to get some clarity” on any economic changes, adding that the decision generates years, not days, of business uncertainty.
When Tata announced its intention in late March and early April to sell the business and withdraw from the U.K. market, it had said it planned to close on a deal as quickly as possible. Indeed, it announced that it had selected seven preliminary offers for additional review about a month later.
But in the time since, it has become increasingly unclear whether Tata will sell the business as a whole, as it initially said it would, or even at all.
However, The Guardian newspaper reported on Sunday that Tata still is likely to keep the business, citing an anonymous source close to the company.
“Unless something drastic happens, then early next week they will make a statement,” the source told the newspaper.
The newspaper also pointed out that with the value of the pound having fallen to a 30-year low against the U.S. dollar as a result of the decision, it will now be more expensive for China to export steel into the country. Steep competition from low-cost imports was one of the reasons Tata put the business up for sale.
That aside, none of the entities bidding for the business have withdrawn their offers, Tata told the BBC. But whether that changes remains to be seen.
Lenders and investors behind the offers undoubtedly are examining whether the decision fundamentally changes the proposed investment, the BBC reported.
“Trade negotiations with potential buyers will not be easy as business activity in the region will take a hit,” Goutam Chakraborty, an analyst at Mumbai-based Emkay Global Financial Services, told The Journal.
He told the newspaper that potential investors probably will “wait and watch to get some clarity” on any economic changes, adding that the decision generates years, not days, of business uncertainty.
When Tata announced its intention in late March and early April to sell the business and withdraw from the U.K. market, it had said it planned to close on a deal as quickly as possible. Indeed, it announced that it had selected seven preliminary offers for additional review about a month later.
But in the time since, it has become increasingly unclear whether Tata will sell the business as a whole, as it initially said it would, or even at all.
However, The Guardian newspaper reported on Sunday that Tata still is likely to keep the business, citing an anonymous source close to the company.
“Unless something drastic happens, then early next week they will make a statement,” the source told the newspaper.
The newspaper also pointed out that with the value of the pound having fallen to a 30-year low against the U.S. dollar as a result of the decision, it will now be more expensive for China to export steel into the country. Steep competition from low-cost imports was one of the reasons Tata put the business up for sale.
That aside, none of the entities bidding for the business have withdrawn their offers, Tata told the BBC. But whether that changes remains to be seen.
Lenders and investors behind the offers undoubtedly are examining whether the decision fundamentally changes the proposed investment, the BBC reported.
