The UK government has offered to buy a 25 per cent stake in Tata Steel’s UK business as part of a rescue package designed to save the struggling industry.
The money will be made available on commercial terms to potential buyers of Tata Steel’s UK assets. It is expected that all - or the large majority - of the support package will be through the provision of debt financing.
"This Government is committed to supporting the steel industry to secure a long-term, viable future and we are working closely with Tata Steel UK on its process to find a credible buyer,” said UK Business Secretary Sajid Javid, who met with Tata's chairman Cyrus Mistry in Mumbai earlier this week.
“The detail of our commercial funding offer is clear evidence of the extent of that commitment," Javid affirmed.
In addition to the support package, the UK and Welsh governments said they will also be willing to consider additional grant funding support, for example to support the development of power plant infrastructure, energy efficiency and/or environmental protection measures, R&D and training.
"We're committed to supporting any credible bid to secure steel making in Wales,” said First Minister of Wales Carwyn Jones. “We have worked with the UK Government to put in place this significant package of support and we believe that this will help secure a successful sale of Tata Steel's operations in Wales and the rest of the UK."
The move was welcomed by industry and union leaders and was viewed as a positive development by sources close to a potential management buyout of the business.
Other options include providing hybrid (convertible debt) or alternative forms of financing and supporting a purchaser's financing by taking a minority equity stake of up to 25 per cent to support any sale.
The Government said it was actively working with Tata Steel and the British Steel Pension Scheme's trustees to find a solution that will help minimise its impact on a potential purchaser and potentially separate it from the business.
A management buyout has emerged as a potential saviour of Tata and the thousands of jobs which depend on the steel industry.
Stuart Wilkie, managing director of Tata's Strip Products, based in Port Talbot in South Wales, has canvassed workers about joining a bid. The investment he is seeking from employees could be as much as £10,000 each, according to sources. Private investors and Government support would also be needed.
The Prime Minister's official spokeswoman said the support would come in the form of debt financing.
"It would be supporting a potential buyer in order to keep the operation safe. We would work alongside a potential buyer to make sure that the Government is doing what it could to support a viable sale.
"If we were to take an extra stake it would be a minority one with the aim of supporting the purchaser in delivering a long-term future for the business. We are certainly not seeking to be controlling the company."