British Steel’s Chinese owner is making a last-ditch attempt to convince French officials to allow it to buy a factory in the country, at a time of growing unease about the Asian nation’s presence in European industry.
Jingye Group rescued the UK’s second-largest steelmaker from bankruptcy in March following months of uncertainty, saving more than 3,000 jobs with a promise to invest £1.2bn in the business.
The deal was supposed to include a facility in north-eastern France that makes rail track, but a parallel sale process for the Hayange site was opened last year by a French court amid misgivings in Paris over the future of an asset it deems of national importance.
There are longstanding concerns about Chinese involvement in Europe’s infrastructure, such as 5G networks, and in light of the coronavirus pandemic the EU has urged members to toughen the vetting of foreign takeover bids.
The Hayange mill has a workforce of about 450 and supplies France’s state-owned railway operator SNCF among others. It processes basic metal made at British Steel’s plant in Scunthorpe, England, and was profitable before the company fell insolvent.
Europe’s steel consumption has slumped during the Covid-19 crisis as car production and building activity stalled, but the rail market could stand to gain if governments pursue public projects to catalyse economic recovery.
An auction for the rail factory is in the final straits with final bids due by mid-July and a conclusion expected by the end of the month, according to several people close to the process. Jingye is among a handful of bidders that include industry giant ArcelorMittal and Liberty Steel, led by the acquisitive British businessman Sanjeev Gupta.
Other interested parties include German steelmaker Saarstahl and Greybull Capital, the private investment company under whose ownership British Steel entered liquidation last year.
France’s economy ministry also wants the successful buyer to take over a separate struggling steelworks, called Ascoval, which has an agreement to supply Hayange.
It is owned by Greybull, which is open to selling the plant should it fail to win the Hayange deal, according to people aware of the matter.
Jingye has offered to invest a total of €88m into the two facilities, with €60m earmarked for Hayange over five years, as well as taking on debt tied to Ascoval, according to two people with knowledge of the bid.
Trade unions look favourably on both the Liberty and Jingye/British Steel offers, say people aware of the situation, although they feel the latter’s funding is clearer.
However, the industrial conglomerate based in the Hebei province faces opposition inside the French government with some officials uncomfortable about a Chinese takeover.
They are unconvinced about Jingye’s finances and worry that the acquisition could allow the group to get around EU anti-dumping rules. Finance minister Bruno Le Maire has called Hayange a “strategic asset”, leaving France the option of blocking the deal.
The president of the region in which Ascoval is located, Xavier Bertrand, prefers Liberty for that plant but has said the financing remained opaque.
Jingye has privately told stakeholders that it would provide Ascoval with two customers for its steel: both Hayange and a British Steel subsidiary in the Netherlands. A person briefed on the plans said it did not want to import steel and the focus was on local production.
British Steel said the bid was “fully financed” by Jingye with no need for public funds.
Saarstahl said it planned investments of a “high two-digit million amount”, while ArcelorMittal said it had extensive experience in rail with four similar manufacturing plants throughout Europe. Liberty Steel and Greybull declined to comment.
Both British Steel and Liberty have sought government financial assistance in the UK because of Covid-19.
