Pensions

Tata Steel jumps 3% after it severs link with British Steel Pension Scheme

Sep 12, 2017 04:11 PM IST | Source: Moneycontrol.com

Move seen as a step to clear decks for its merger with Thyssenkrupp to take place soon.

Moneycontrol News

Investors in Tata Steel stock cheered the company’s decision to conclude its new agreement under which its UK business stands separated from the 15-billion pound British Steel Pension Scheme (BSPS).

“Tata Steel UK has received confirmation from the pensions regulator that it has approved a regulated apportionment arrangement (RAA) in respect of BSPS,” Tata Steel said in a statement here.

As part of the arrangement, a payment of 550 million pound has been made to BSPS by Tata Steel UK and shares in Tata Steel UK, equivalent to 33 per cent stake, have been issued to the BSPS trustee, the steel giant said.

Last month, Tats Steel had announced clinching of the deal facilitating detachment of the BSPS from its UK business. The company, in the statement, said its UK business has agreed to sponsor a proposed new pension scheme subject to meeting of certain qualifying conditions.

Major brokerage houses were upbeat on this development as most of them lastly felt that it could clear the decks for its merger with Thyssenkrupp.

Brokerage: PhillipCap | Rating: Buy

The brokerage firm said that RAA nod from pension regulators is a positive for the stock and this final approval was the last key milestone for pension resolution. Further, it expects Thyssen JV to be announced soon post after this approval.

Brokerage: HSBC | Rating: Buy | Target: Rs 750

HSBC said that the approval of Regulated Approtionment Arrangement now paves the way for merger with Thyssenkrupp. In fact, this merger will consolidate European steel industries further. The merger could help unlock synergies, it added.

Brokerage: Morgan Stanley | Rating: Overweight | Target: Rs 741

The global research firm said that the pension issue is resolved and the focus now shifts to the potential JV with Thyssenkrupp. The merger will be a positive for both companies, it added.

At the close of market hours, Tata Steel was quoting at Rs 683.15, up Rs 21.85, or 3.30 percent. It touched a 52-week high of Rs 692.00.

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