Tata Steel Buyout Team Would Cut 1,000 Jobs

A management buyout of Tata Steel UK would result in an additional 1,000 job cuts across the country, the bid team has confirmed.

Excalibur Steel is understood to be among at least five entities to have expressed an interest in taking over the Indian firm's remaining steel assets in the country.

Tata UK executive Stuart Wilkie, who is leading Excalibur's bid, is using a revised version of a previously rejected turnaround plan to buy the business which employs 11,000 people currently, including 4,000 at the sprawling Port Talbot works in south Wales.

It (Other OTC: ITGL - news) says the 1,000 job cuts are in addition to 1,000 announced by Tata before it put the business up for sale.

Excalibur wants 10% of its funding to come from employees, including those in the management buyout team, and is also counting on support from the Government which has raised the prospect of taking a 25% stake in the winning bid.

Its bid team is meeting banks to seek its own financing and hopes to have what it would need agreed by the end of next week.

The Government has admitted that the issue of pension liabilities, believed to run into hundreds of millions of pounds, is a potential stumbling block to any deal.

Excalibur has made it clear that it would walk away if forced to carry the liability.

The vehicle, along with Sanjeev Gupta's metals group Liberty House, is among two of the five names believed to have submitted letters of intent this week to buy Tata's UK operations.

Liberty released a statement on Friday which sought to bolster its case that Port Talbot's future lay with the production of recycled steel rather than slab, in a move that would see blast furnaces replaced by electric arc furnaces.

It said the head of a Cambridge university team which had researched the issue had joined its advisory team.

The statement said that Professor Julian Allwood's findings had "demonstrated a powerful case for a new, recycling-based, British steel industry".

Mr Gupta, who is Liberty's executive chairman, has warned he could walk away from an offer if the price is too high - and stated his company will not take on any plants which will bring sustained losses.

He has demanded further reductions on energy costs from the Government.

The Tata sale process does not include its Scunthorpe plant which has already been sold in principle to Greybull Capital for £1.

The division does include steel-making capability in Rotherham and nine product plants (Other OTC: UBGXF - news) .