The last major restructuring in the UK steel industry will take place this year following the £40m purchase of Kent mini-mill Co-Steel by Cardiff-based ASW. Sheerness-based Co-Steel was put up for sale last year by its Canadian owners.
Job losses among the combined group’s 2,750 workforce have yet to be agreed. Unions are working with ASW to keep redundancies to a minimum.
Graham Mackenzie, the director general of the Engineering Employers’ Federation, who joins the enlarged group as chief executive in April, said: ‘There will be a combination of restructuring and investment, with a resulting £24m improvement in profitability.’
Both groups have been making losses and have been competing on certain commodity steel products. The merger will enable each plant to specialise production and cut overcapacity. Sheerness will continue to develop higher-grade engineering steels, while Cardiff and ASW’s other operations in France will focus on producing reinforcement steels used in the construction industry.
ASW’s bar mill at Cardiff will be upgraded with an initial investment of about £4m, said Mackenzie. This will enhance its product range and margins. Further cash to develop Sheerness’s range of engineering steels will depend on progress of the initial restructuring.
The complex financing of the deal could leave venture capital company Candover with up to 54% of the new group’s share capital.