Britain’s last aluminium smelter is being sold by Rio Tinto to Sanjeev Gupta, the Indian-born commodities tycoon whose private multinational Liberty House attempted to acquire Tata Steel’s troubled UK arm earlier this year.
The £330m transaction, which includes two nearby hydroelectric schemes, will be led by Simec, a company owned by Mr Gupta’s father.
Simec will retain ownership of the Lochaber hydroelectric assets, but will transfer the smelter, which produced 47,000 tonnes of primary aluminium from raw materials last year, to sister company Liberty House.
The deal will safeguard 150 jobs at the site in Scotland, and takes total disposals made by Rio Tinto this year above $1bn.
Rio Tinto’s aluminium business told workers at the start of this year that it was reviewing its only operational assets in Britain, as the group undertakes a sweeping rationalisation of its portfolio in response to the commodities downturn.
Rio said it has now agreed more than $1.3bn in divestments this year, taking the total value of completed or announced disposals to $5.3bn since the start of 2013.
Alf Barrios, chief executive of Rio Tinto Aluminium, said: “This is a value-creating sale for Rio Tinto and represents another example of refining our portfolio to focus on our suite of tier one assets.”
The deal is expected to complete within a month and is being financed by a mixture of equity and funds raised through a debt securitisation. It includes a 100,000 acre estate hosting the water catchment area for the hydro schemes, covering the foothills of Ben Nevis, Britain’s highest mountain.
The agreement includes a payment on completion of £180m, in addition to a further payment of £150m in February 2017. Simec, which is backing a number of renewable energy projects in the UK, has overlapping business interests with Liberty House under the GFG Alliance umbrella.
Hundreds more jobs in the regional supply chain will be supported by the plants’ survival, said Liberty House.
It represents the latest piece in a UK industrial jigsaw being assembled by Liberty House, which has bought a number of distressed heavy manufacturing assets.
Mr Gupta said: “This transaction fits very well with our vision to develop a sustainable and competitive metals industry in the UK as a key part of our global industrial business.”
As Britain’s steel sector reeled last autumn from a collapse in global prices for the metal, Liberty House was firing up a rolling mill in Newport, South Wales. It has since acquired metals and engineering businesses from the ashes of the Caparo Group and some of Tata Steel’s smaller British units.
However, its attempt to buy Tata’s rump UK steel business — centred on the giant Port Talbot plant in south Wales — was thwarted when the Indian conglomerate instead opted to pursue talks over a merger with German rival ThyssenKrupp.
Analysts were surprised by the sale by Rio, saying they ascribed very little value to the assets, which have been operating on wafer thin margins.
“Rio Tinto continues to bolster its balance sheet which remains the strongest of its peers with a projected year-end 2016 net debt position of less than $11.5bn,” said Edward Sterck, analysts at BMO Capital Markets.
“Arguably, Rio Tinto’s efforts to continue to improve its balance sheet increase its firepower when it comes to making additional acquisitions. The company has stated that it would like to expand its copper portfolio, although we note that there is a lack of tier one assets currently for sale.”
Rio’s chief executive Jean-Sébastien Jacques is due to make his first strategy presentation to investors in Sydney later on Wednesday.
Additional reporting by Neil Hume
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