HBIS is one of the largest steelmakers in the world, with revenue of over $40 billion.
Moneycontrol News
In a major step towards refocusing its attention on the domestic markets, Tata Steel Monday said that it will sell 70 percent of its stake in assets in South East Asia.
TS Global Holdings (TSGH), a unit of Tata Steel, has signed an agreement with Beijing based HBIS Group, which is one of the largest steelmakers in the world, with revenue of over $40 billion.
"As per the agreement, the divestment will be made to a company in which 70 percent equity shares will be held by an entity controlled by HBIS, and 30 percent will be held by TSGH. The agreements were signed today in Beijing, China," said a Tata Steel statement.
The two assets are Singapore-based NatSteel Holdings Pte. Ltd, and Tata Steel (Thailand). The deal also includes Tata Steel's operations in Vietnam.
Moneycontrol, had earlier reported that Tata Steel will retain 30 percent of its stake in these assets. The company didn't disclose financial details of the deal.
“The definitive agreement signed today between the two companies is a significant milestone in our strategic relationship, offering the SEA (South-East Asia) business robust growth opportunities, given the access to resources, technical expertise and regional understanding of HBIS," said T V Narendran, CEO & Managing Director, Tata Steel.
The deal will help Tata Steel focus on the domestic business, which is a great opportunity, he added later during a conference call with journalists.
Financial details
The new entity will have an enterprise value of $685 million, including about $150 million of debt.
Tata Steel is selling the stake at 1.5 times the book value of the assets, said Koushik Chatterjee, Executive Director and Chief Financial Officer, Tata Steel. He added that the company will take away $327 million in cash, from the deal.
Tata Steel held 100 percent stake in NatSteel, and 67 percent in Tata Steel Thailand.
The two senior executives from the Indian steelmaker added that Tata Steel will hold on to the its 30 percent stake for "two-three years," and will wait for an upside before exiting the new entity. The two said an initial public offering of the new unit is an option.
The unit will have its Deputy CEO and Deputy CFO from Tata Steel. But it will be up to HBIS to name the new company. The deal, added Chatterjee, will be completed in two months.
