TS Global Holdings (TSGH), a unit of Tata Steel, has reportedly signed an agreement with China’s HBIS Group to sell 70 percent of its stake in assets in South East Asia. Apparently, the two assets in question are Tata Steel (Thailand) as well as Singapore-based NatSteel Holdings Pte. Ltd. This deal would allegedly include operations of Tata Steel in Vietnam as well.
According to a statement made by Tata Steel regarding the agreement, the divestment would be made to a company in which TSGH would be holding 30 percent of the equity shares, while the remaining 70 percent would be held by a separate entity controlled by Beijing-based HBIS Group. The agreements were inked on January 28, 2019 in Beijing, China.
Managing Director and CEO of Tata Steel, T V Narendran, was quoted saying that this definitive agreement signed by the two companies is a crucial milestone in their strategic relationship, offering robust growth opportunities for the SEA (South-East Asia) business, given the access to resources, regional understanding and technical expertise on offer by HBIS.
Sources familiar with the matter cited that the new entity would be having $685 million of enterprise value, which would include debt of around $150 million. Koushik Chatterjee, Chief Financial Officer and Executive Director, Tata Steel, mentioned that the company is selling the stake for 1.5 times higher than the book value of those assets. From this deal, the company would also take away $327 million in cash.
The two senior executives from Tata Steel added that the Indian steelmaker would be holding on to its 30 percent stake for two to three years and would wait for an upside before it considers exiting the new entity. The executives further said that an initial public offering (IPO) of the new unit would also be an option.