Thursday, Jun 4, 2020
International Finance

Network Rail prepares to take over British Steel’s railway division

Potential bidders for purchasing the business also includes JSW, Hesteel, Baowu, and Liberty

Britain’s Network Rail announced on Sunday that it is prepared to take over some of  British Steel’s ‘railway critical’ assets, according to media reports. Network Rail is a state-owned rail infrastructure operator. 

The operator said in a statement that “We have made an indicative offer for some railway critical assets although our overwhelming preference is that a purchaser for the entire business is found.”

Potential bidders for purchasing the business also includes JSW, Hesteel, Baowu, and Liberty, according to Financial Times. That said, multinational steelmaker Evraz and  international engineering group Systra have also shown interest in British Steel’s railway business. 

British Steel’s railway business is largely focused on welding, finishing, and storing of rails for the UK’s train network, as reported by The Telegraph.

According to Financial Times, Network Rail is one of British Steel’s biggest customers, with an estimated purchase of 100,000 tonnes of rails from the company each year.  Although National Rail has made its offer, media reports have stated that it could raise concerns, especially since it is owned by the UK government. The purchase could be perceived as means to ‘nationalise the business’, Financial Times reported. 

John O’Connell, the activist group’s chief executive, told Financial Times: “For Network Rail to bid for some of the assets is wrong. Since being reclassified as a central government body, and the Department for Transport loaning it £30bn, Network Rail is arguably too overleveraged. If assets of British Steel are to remain economically viable, bids should not be forthcoming from organs of the state.”

British Steel was subject to compulsory liquidation in May. Meanwhile, the UK government is financially supporting the company until it finds a suitable buyer. 

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