International law firm Salans was the principal legal adviser for Sahaviriya Steel Industries (SSI) in its asset acquisition of the steel production facilities in Redcar (known as Teesside Cast Products). The deal exchanged on 24 February 2011, following the entry into a Memorandum of Understanding in August 2010. This major steel production site was sold to SSI by Tata Steel Group, who in turn had inherited the site as part of its takeover of Corus UK Limited in 2007.
This transaction, worth US$468m, represents one of the largest industrial and real estate deals in the UK for many years, and is especially significant for its economic and social impact. SSI plans to re-open the plant and create around 800 new jobs at the steel plant, on top of the existing workforce of 700. This will have significant impact in a part of the UK which has been especially hard hit by the recession and recent private and public sector cutbacks.
The Salans team was led by corporate partner Zarko Iankov from its London office, and comprised a multi-practice approach, including experts in corporate, banking & finance, real estate, commercial, IP/IT, competition, insolvency, shipping, trade & commodities and employment law. Salans’ alliance partner Pinsent Masons also provided environmental and pensions law input on the transaction.
The acquisition presented considerable challenges from a corporate, real estate, employment and projects point of view. The asset and business separation exercise was complex in light of the ‘mothballing’ that had taken place 12 months ago, and securing multiple titles across a site covering 3,000 acres added to this complexity. Ensuring access to the purpose-built tracks for the rolling stock that connect the Teesside Cast Products site with the port at Redcar was also an essential factor in the deal’s success. The TUPE transfer and pensions aspects of the acquisition, and union relations, presented additional dimensions. The complexities presented by the acquired TCP assets and business necessitated putting innovative holding and operational structures and service arrangements in place. The transaction also involved negotiating and securing considerable acquisition finance (both debt and equity) which added to the complex nature of the transaction.
Mr Jira Chotinuchit, Vice President and Head of Legal for SSI, said: “I cannot underestimate the legal effort involved in getting us to this point, or the breadth of legal questions and problems that arose along the way. Salans’ technical capability, commercial approach and positive attitude in finding solutions to the various legal issues as they arose were both refreshing and effective. This deal required considerable commitment, patience and stamina as well, and the management team at SSI are very grateful to the Salans team.”
Commenting on the successful exchange on the deal, Zarko Iankov said: “This has been a significant deal for everyone on the team, and we were very aware of the high stakes both for the client and for the wider community in the North-East. I am delighted we have been able to complete the exchange, and it is a good reflection of Salans’ capability to handle high value, complex and demanding transactions from our London office, using our cross practice expertise.”
