Greybull Capital: Threatened steelworks may be saved by buyout firm that rescued Monarch

In October, Tata Steel said it could axe around 1,200 jobs at the Scunthorpe plant, which employs some 4,000

Tata Steel has announced that it can not keep its Scunthorpe plant open beyond next March (Getty Images)

The private equity firm that rescued the holiday airline Monarch has emerged as the frontrunner to buy Tata Steel’s struggling long-products business.

Greybull Capital, run by the brothers Marc and Nathaniel Meyohas, has signed a letter of intent with Tata to enter exclusive negotiations over a sale that could ensure a future for the Tata division and its main steelworks in Scunthorpe.

Unions welcomed the news yesterday, but warned that the Government still needs to help to secure a future for the steel industry in the UK.

Earlier this week, the Commons Business, Innovation and Skills Select Committee said the Government had done too little, too late to help Britain’s steel industry.

Unite’s national officer for metals, Harish Patel, said: “Ministers also need to realise that the matter does not end here – the industry is still in crisis.”

The Indian conglomerate Tata has been trying to sell the long products business, which makes steel components for the construction industry, for more than a year. But high energy costs in the UK and cheap Chinese steel imports have made life increasingly difficult for the industry.

A planned sale to Klesch Group, the Swiss-based commodities producer and trader, fell through in August, with the buyer blaming a lack of help from the Government.

In October, Tata Steel said it could axe around 1,200 jobs at the Scunthorpe plant, which employs some 4,000.Tata Steel Europe’s chief executive, Karl Koehler, said the long products unit – which also includes mills in Teesside and northern France, as well as distribution facilities – had no future within the company beyond the current financial year, which ends in March 2016. But since then three potential buyers have emerged. Another private equity firm, Endless, and an unknown bidder are said to have put in final offers alongside Greybull earlier this month.

Mr Koehler said yesterday: “This is an extremely critical time for the whole industry, and we have been working hard to explore all options that could provide a future for the Long Products Europe business.

“We will now move into detailed negotiations with Greybull Capital. It is too early to give any certainty about the potential outcome of these discussions.”

Tata bought Corus, the renamed British Steel, for $13bn (£9bn) in 2007, to become Europe’s second largest steel maker.

Greybull injected £125m into Monarch in return for a 90 per cent stake late last year. After severe cost-cutting and the benefit of lower fuel prices, it recently announced that it expects a £130m turnaround this year, from underlying losses of £90m to profits of £40m.

Greybull also backed the retail veteran Mike Greene with the £25m purchase of 140 convenience stores from Morrisons in September after the supermarket chain admitted it got into the convenience market too late.