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Fri 10 Feb 2017 01:51 AM

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Man of steel: Sanjeev Gupta

Liberty House Group’s imminent buyout of Tata Steel’s operations in Northern England could help save a stained industry. CEO Sanjeev Gupta explains to Arabian Business why the metal is so precious

Man of steel: Sanjeev Gupta
Gupta sees big opportunities in the GCC.

Just two years after leaving Dubai to build Liberty House Group’s industrial business, Sanjeev Gupta is being hailed a hero by steel workers in the UK.

He is expected to imminently close a deal to purchase Tata Steel’s beleaguered specialty steel unit in Rotherham in Northern England, saving about 1,700 jobs. The $126m deal follows several other acquisitions that have saved about 1,200 additional workers, Gupta claims.

Liberty House has also spent $415m buying Rio Tinto’s aluminium smelting plant in Scotland, as well as Caparo Tubular Solutions in West Midlands, England, and CovPress, a metal stamping and assembly specialist based in Coventry, England.

The Tata Steel buyout is one of the most significant deals in the UK in years, coming after months of protests and calls for parliamentary intervention to help save not only jobs but potentially the country’s entire steel industry.

Gupta says he is “very close” to closing the deal with one of the most famous Indian business families.

“The agreed timeline is there and as far as both sides are concerned it’s just the question of winding down things,” the executive chairman tells Arabian Business.

Gupta hit the headlines last year when he bid to acquire Tata Steel’s loss-making Port Talbot operations in South Wales, before Tata Group opted to engage in merger talks with German rival Thyssenkrupp.

While Gupta’s international purchases have been in the media spotlight of late, Gupta has also been steadily paving his way through the Middle East. He reveals he is in talks for the possible purchase of a steel-related business in the UAE. He says there are “good prospects in downstream steel” in the country, but declines to provide any further details on the potential acquisition.

“We are extensively discussing the issue in the UAE, and the business is related to steel,” he says.

Gupta is familiar with the UAE, having spent seven years living in Dubai, from where he handled the company’s trading business, now managed by Paul Francis. He moved to the UK in early 2015.

Tata Steel's European operations returned to a profit in the fourth quarter of 2016, making $92.6m.

“In the past two years, we have done an enormous amount of work on the industrial side so I moved back to the UK to develop our industrial business,” he says.

The company continues to operate in the UAE through Liberty Building Solutions, selling tubular products in the region. Gupta says he has further ambitions in the emirates.

“We plan to offer full building solutions, not just selling tubing products here. At the moment, it’s a warehouse, but eventually, we may look at production such as blending, cutting, adding switchgear and making a building solution,” he says.

He is reserved when pressed for details of his other plans in the GCC, but says the firm is considering entering the energy, financial services and solar power sectors. In particular, he says the financial services sector has good prospects because there is “still much to evolve in this sector in the region”.

Liberty House Group is part of the GFG Alliance, a conglomerate created with his father, Parduman Gupta. The alliance has a global turnover of $6.7bn and net assets of $1bn. It employs 3,000 people worldwide, excluding the 1,700 jobs that would be added with the Tata Steel acquisition, and is present in 30 countries.

“We are also getting into oil and gas pipeline businesses as part of the steel business. That is something which will happen in this region, though initially it will start in the UK and the US. We will sell the product in the Middle East and may look at possible production, going forward,” Gupta says.

Twenty-five years after establishing Liberty as a trading company focussed on Africa and Asia while studying economics and management at Trinity College, Cambridge University, his businesses now generate turnover of more than $6bn annually.

In November, Gupta completed the purchase of Tungsten Bank, renaming it Wyelands Bank, which he then said was “part of his wider vision to promote the revival and growth of industrial businesses in the UK”.

He says Liberty is planning to list its financial services division as early as this year.

“We recently purchased a bank in the UK, and we may list it in London,” he says. He later told Reuters the part-listing could be made in London in 2018.

The Covpress at Coventry covers an area of 33,000 sqm.

While the financial arm could be listed in the UK, Gupta says any initial public offering of the steel business would be in the US, where valuations are more appealing.

“The US has amazing valuations for steel companies, especially the successful ones. I was there examining options on various investments and later realised myself high valuations which are almost 80 to 82 times earnings,” he adds.

Liberty’s listing option is not about fundraising, Gupta says, but rather about creating a platform for future equity.

“We don’t need equity at the moment. The move is towards becoming more corporate, more transparent and [having] better governance. So a public process gives you all that,” he says.

Liberty is also among the companies shortlisted to buy Australia’s bankrupt steel producer Arrium and three steel businesses in the US.

Gupta says there are plenty of growth prospects in the US steel industry — so much so they could challenge his UK steel business.

“We have a quite an ambitious plan which could challenge our UK operations. At the moment plans are not cemented but could potentially be 5 million tonnes,” he says.

For now, all eyes are on Liberty’s much-anticipated takeover of Tata Steel in the UK. It could be sufficient to revive an industry that a year ago was almost written off.

“Britain was once the inventor, engineer, designer and manufacturing powerhouse of the world. But as its raw materials diminished, other countries took the lead as it lost its leadership position. We now stand at a crossroads. We can accept this fate and let the last remaining pieces of industry fall, or we can revive it, using the skills, knowledge, and resources available to us and lead a new industrial renaissance in [the UK],” he says.

There is also an opportunity to profit from abundant raw material — considered by some as good as scrap. In May 2016, a report by Cambridge University said the supply of UK scrap metal would double from 10 million tonnes to 20 million tonnes a year over the next ten to 15 years.

Liberty will take over Tata’s Rotherdam unit.

With that in mind, Liberty is envisioning a “green steel” revolution.

“The ‘green steel’ model is our vision and is based on domestic scrap, domestic energy, domestic engineering and domestic consumption,” Gupta says, adding his company will ramp up its UK steel output to 5 million tonnes in five years (2017-2022).

“We want to have 5 million tonnes of recycled steel, and we have taken steps towards that. Tata Steel [operations at Rotherham] will give us 1.3 million tonnes and our Newport plant will give us 2 million tonnes. So between them we have 3 million tonnes. Now, we are looking at various options for that 2 million tonnes,” he says.

The recycling strategy also works as a hedging against commodity price risks.

“The market is not good for commodities fundamentally, and obviously the biggest factor is always China,” he says, adding that Liberty’s business model is not dependent on commodity prices.

“We are doing domestic recycling. The price of scrap and the price of steel move alongside each other. As we collect and melt it domestically, there is no price risk because you are not carrying inventory, unlike large integrated steel producers who import their raw material from Brazil and Australia. That has a risk because they have to have very long supply chains, carry more inventory and their spreads tend to be more volatile,” he says.

Liberty’s strategy could determine just how precious the metal is.

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