March 3, 2020 / 1:00 PM / 3 months ago

China's Jingye agrees to complete British Steel takeover

(Reuters) - Chinese steelmaker Jingye Group said it will complete its buyout of British Steel, with 1.2 billion pounds ($1.5 billion) of investment, despite uncertainty over the control of British Steel’s French unit.

Jingye said in a statement on Tuesday it will acquire British Steel’s main plant, in the northern English town of Scunthorpe, even though it does not yet have a reply from the French government about a French unit seen as a potential obstacle to the deal.

Jingye said it agreed to the Official Receiver’s proposal, backed by the British government, to finish the deal in stages, initially completing the purchase of the British and Dutch assets before moving to the French.

“We are delighted to have reached this agreement and look forward to completing the initial transaction over the coming days so we can begin a new chapter in British steelmaking,” Jingye Chief Executive Li Huiming said.

In a statement, the union Community welcomed the news and said the new investment should be transformational.

“This has been a long and, at times, very difficult process,” Roy Rickhuss, general secretary of Community, said in a statement.

He also called on the British government to support the industry to ensure “British Steel and other steel producers have the best chance of success”.

British Steel was placed into compulsory liquidation last May after Greybull Capital, which bought it for a token one pound from Tata Steel in 2016, failed to secure funding to continue its operations.

The deal completion will take place on March 9, saving 3,200 jobs in Scunthorpe, Teesside and elsewhere. A further 100 jobs are to be transferred to steel stock-holder Barrett Steel following the sale of four British Steel distribution centres.

The agreement followed talks with the government, unions, suppliers and employees in Britain and the Netherlands, Jingye said.

Globally the steel sector is under pressure from weak demand, aggravated by the impact of the coronavirus outbreak.

($1 = 0.7816 pounds)

Editing by Veronica Brown and Barbara Lewis

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