Tata Steel’s talks for sale of European long products unit fail as Klesch walks away

 American billionaire Gary Klesch has pulled out of a deal to buy Tata Steel's long products business in the Europe over expensive energy costs, cheap Chinese shipments and lack of government subsidies, throwing a spanner in the works of the Indian major's restructuring efforts. 

The withdrawal comes after 11 months of negotiations between the two parties, leaving Tata Steel with no option but to continue with the struggling long products business, which employs 6,500 people in Europe Stock Market Tips

Tata Steel, which had a back-up plan in place recommended by the trade union, has parked the long products business into a separate company that will help the unit get government funds and protect jobs. 

Klesch, owner of the Swiss-based Klesch Group, reportedly said that he was withdrawing from the deal due to the UK government's lack of interest in old economy sectors, leaving it to bleed. 

Steel analysts expected the long products division's sale to turnaround Tata Steel's European operations  Nifty Trading Tips

Tata Steel has been grappling with slowing demand, rising Chinese imports and energy costs and shrinking profit margins in Europe. 

The Jamshedpur-based steel producer, which entered Europe through the $13 billion acquisition of Corus in 2007, has been reorganising the European operations by slashing costs and jobs and focusing on high-value steel products. 

In the fourth quarter of fiscal 2015, Tata Steel took a $782 million non-cash charge relating to the European long products unit, which has assets in Scunthorpe, Teesside, Dalzell and Clydenbridge in the UK as well as in France and Germany.